FTX bankruptcy and fallout: Monday updates and commentary

David Duong, head of institutional research at Coinbase, forecasts further FTX contagion developments to push Bitcoin down to US$13,500:

“The relative crypto market stability of recent months was interrupted … We have seen broader market instability despite some positive macro developments for risk assets as a whole … It’s still emerging which counterparties may have lent or interacted with either FTX or Alameda and what those exact liabilities are … BTC could not only retest 2022 lows but touch the $13K level … We think there is support at $13.5K.”

Anto Paroian, CEO and Executive Director of crypto hedge fund ARK36, says it will take weeks for the full scale of FTX bankruptcy to become clear:

“FTX now joins the infamous club of centralized crypto entities that went bust this cycle because they took enormous liberties not only with its customers’ funds but also with ethics, integrity, and the very ideals of crypto.”

“It is difficult to imagine a better case for [decentralization] than the current bear market which exposed the dangers of putting too much trust and confidence in big, centralised entities – even if they presume to promote crypto adoption.”

“Moving forward, users should consider every exchange potentially insolvent unless proven otherwise through proof-of-reserves. Investors should also brace themselves for contagion from FTX’s bankruptcy. FTX had strong and diverse ties to the industry, acting as a lender of last resort and a VC investor. It will take weeks before we see the full extent of the damage done.”

Changpeng Zhao, CEO of Binance, claimed his exchange platform “never shorted FTT” in response to parody poster of The Big Short, depicting him and other major players in the FTX fallout:

“Full disclosure: Binance never shorted FTT. We still have a bag of as we stopped selling FTT after SBF called me. Very expensive call.”

CZ Zhao also announced that his exchange would be establishing an industry recovery fund:

“To reduce further cascading negative effects of FTX, Binance is forming an industry recovery fund, to help projects who are otherwise strong, but in a liquidity crisis… Also welcome other industry players with cash who wants to co-invest. Crypto is not going away. We are still here. Let’s rebuild.”

Sean Farrell, head of digital asset strategy at FundStrat, projected there are “lower lows” to come for the crypto market:

“In the past six months, we have witnessed the unraveling of a web of leverage that entangled the crypto space. It started with LUNA/UST, seemingly resolved in the 3AC unwind, only to find that SBF now appears to have been insolvent as well…. We think it is appropriate to wait for lower lows as there is good reason to think that there will be other casualties, which could lead to forced selling or, at the very least, bad headline risk.”

Joe DiPasquale, CEO of BitBull Capital, says Bitcoin may fall past US$16,000 as more information surrounding the FTX fallout comes to light:

“The last few days have seen the space shaken by the collapse of SBF’s empire, and expectedly, despite traditional markets showing some strength, BTC and crypto took a hit due to poor sentiment. Even though BTC has settled around $16,000 for now, the extent of the damage to other companies, funds, exchanges is as yet unknown, and may come to the fore in the weeks to come.

“As before, we believe BTC under $20,000 is an attractive long-term accumulation zone, but we also remain cautious until the current situation is satisfactorily resolved and sentiment appears to start moving toward relative normalcy. Notably, the last few days have seen a significant drop in exchange reserves for BTC and stablecoins, indicating a lack of trust and prevalence of fear in the market. We will be monitoring for signs of returning confidence among the masses as a positive indicator.”

Jonathon Miller, Australian managing director, Kraken, says trust will need to be rebuilt for the crypto industry to rebound:

“The FTX situation has been a huge setback for the industry and it is going to take some time for the broader industry and market to recover from this. We are seeing the market impacted by a growing skepticism of exchange issued tokens as an initial response. Sensible industry measures, such as regular Proof of Reserves, will be a vital start to regaining the loss of trust in the ecosystem.”