The aftershocks from last week’s massive trillion dollar crypto industry earthquake continued to be felt on Monday.
Digital currency prices fell again as the crisis engulfing the market deepened over the weekend. Bitcoin, the biggest crypto in the world, has fallen around 65% so far this year. It was trading at around $16,500 on Monday, according to CoinDesk, and analysts believe it could drop below $10,000 in the coming days.
Meanwhile, the world’s second most valuable cryptocurrency, Ethereum, isn’t faring much better. It was trading at $1,231.53 on Monday, after falling more than 20% in the past week, according to data from CoinDesk.
The plunge comes as investors continue to grapple with the staggering implosion of FTX Group, one of the largest and most powerful players in the industry.
Some industry insiders said the company’s downfall sparked a “Lehman moment”, referring to the 2008 collapse of the investment bank that sent shockwaves around the world.
The episode not only destroyed trust in the crypto industry, but it will also encourage global regulators to tighten the screws. Some of the biggest names in the industry have said they would welcome the scrutiny, if it helps restore confidence in the industry once again.
There are “a lot of risks,” said Changpeng Zhao, who runs crypto exchange Binance. “We saw last week that things are going crazy in the industry so we need regulations, we need to do it right,” he added.
The Binance boss, known as CZ, was speaking at a conference in Indonesia on Monday. He said last week that comparing the current crypto turmoil to the 2008 global financial crisis is “probably an exact analogy.”
Zhao was a key player in the events surrounding FTX’s downfall. Binance had reached a tentative bailout deal with FTX earlier the last week, but that transaction failed almost immediately.
FTX continued its downward spiral over the weekend, after filing for bankruptcy on Friday. And, another big name in the industry admitting to mismanaging funds, scaring investors even more.
Here’s how things have unfolded over the past few days, showing that the crisis has only just begun.
FTX moved its headquarters from Hong Kong to the Bahamas last year, with former CEO Sam Bankman-Fried hailing it as “one of the few places to have a comprehensive crypto framework in place” at the time.
Bahamian authorities on Sunday said they were investigating possible criminal misconduct surrounding the company’s implosion.
“In light of the collapse of FTX globally and the provisional liquidation of FTX Digital Markets Ltd., a team of financial investigators from the Financial Crimes Investigation Branch are working closely with the Bahamas Securities Commission to investigate any criminal misconduct,” the Royal said Bahamian police in a statement.
It is unclear what particular aspect of the rapid collapse FTX authorities are investigating.
Bankman-Fried, the 30-year-old stock exchange founder, was one of the faces of the crypto industry, amassing a fortune totaling $25 billion that has since disappeared. He had been considered the white knight of the crypto world, previously stepping in to rescue struggling companies after stablecoin TerraUSD collapsed in May.
FTX, backed by elite investors like BlackRock and Sequoia Capital, has quickly become one of the biggest crypto exchanges in the world. Its collapse was preceded by the decision to lend billions of dollars in assets to clients to fund risky bets by Alameda, FTX’s crypto hedge fund, The Wall Street Journal reported Thursday.
The Bahamas investigation came a day after the bankrupt exchange announced it was opening its own investigation.
On Saturday, FTX said it was investigating whether any crypto assets had been stolen and had since moved all of its digital assets offline. Crypto risk management firm Elliptic said that while the theft was unconfirmed, $473 million worth of crypto assets were allegedly stolen from FTX.
In an early Saturday tweet, FTX General Counsel Ryne Miller said the company “took precautionary measures” and moved all of its digital assets to cold storage. The process was “accelerated” on Friday night “to mitigate damages when observing unauthorized transactions,” Miller said in a tweet.
Miller said Friday night that FTX is “investigating anomalies” regarding crypto wallet movements “related to the consolidation of FTX balances on exchanges.” The facts are still unclear and the company will share more information as soon as possible, he added.
As the scrutiny of big players in the crypto world increases, another major incident alarmed investors over the weekend. Singapore-based Crypto.com has admitted to accidentally sending over $400 million worth of Ethereum to the wrong account.
Its CEO, Kris Marszalek, said on Twitter on Sunday that the transfer of 320,000 ETH was made three weeks ago to a corporate account at rival exchange Gate.io, instead of one of its wallets. offline, or “cold”.
And although the funds have been recovered, users are pulling out of the platform fearing the same outcome as FTX.
“We have since strengthened our process and systems to better manage these internal transfers,” Marszalek tweeted on Sunday. The platform’s native token has fallen more than 20% in the past 24 hours, according to CoinDesk on Monday.
At the Bali conference, Binance boss Zhao signaled that regulating the industry would not be easy.
“The natural response from authorities is to borrow regulations from traditional banking systems…but crypto exchanges operate very, very differently from banks,” he said on Monday.
“It’s very, very normal for a bank to move users’ assets around for investments and try to generate returns,” he explained. If a crypto exchange operates this way, it’s “almost guaranteed to go down,” he said, adding that the industry collectively has a role to play in protecting consumers.
“Regulators have a role… but nothing can protect a bad player,” he said.
— Matt Egan, Ramishah Maruf and Allison Morrow contributed to this report.