Anomalies were discovered on Saturday when approximately $650 million was withdrawn from the funds of the collapsed FTX cryptocurrency exchange. This has led to a further decline in the value of the cryptocurrency market, wiping out $150 billion. FTX filed for bankruptcy protection in the United States after a liquidity crisis prevented them from fulfilling customer requests for billions of dollars in withdrawals.
Concerns were raised about potential hacking as abnormal wallet movements were noted following the collapse. To mitigate damage, FTX moved digital assets into offline storage (cold storage) after the bankruptcy, but the process was expedited upon observing unauthorized transactions.
FTX was once a top five cryptocurrency exchange globally, handling billions of dollars in daily trades. Nevertheless, concerns about its financial stability led to the liquidity crisis.
FTX founder Sam Bankman-Fried denied rumors of him flying to South America, clarifying that he was still in the Bahamas. The founder of Binance, Changpeng Zhao, warned that FTX’s collapse could trigger systemic consequences comparable to the 2008 financial crisis.
The global cryptocurrency market lost approximately $147 billion, dropping from $1 trillion to $853 billion by Friday. Bitcoin’s value plummeted against the dollar, trading around $16,000, a significant drop from its all-time high of $68,000 just a year ago. With over 100 million customers worldwide, major US exchange Coinbase is among the platforms affected.
Experts suggest that the crypto industry is entering a “crypto winter” that may escalate into an “ice age” due to the recent turmoil. Some anticipate mass bankruptcies and a contagion effect that could last for weeks. Blair Halliday, the UK head of cryptocurrency exchange Kraken, believes the FTX crisis will have a lasting negative impact on consumer perception of cryptocurrencies, calling for increased regulation to stabilize the sector.
The US Securities and Exchange Commission (SEC) and the Department of Justice have initiated investigations into FTX. Changpeng Zhao expressed the significance of this event, stating that it is devastating to consumer confidence and draws similarities to the collapse of Luna digital currency in May.
“With this type of event happening, it’s devastating. A lot of consumer confidence is shaken,” Changpeng Zhao highlighted during a conference in Indonesia.
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