Crypto markets suffered significant losses on Thursday, with Bitcoin trading close to a two-year low as investors worried about the consequences of the collapse of the crypto exchange FTX, which was looking for additional funding to close a huge hole in its finances.
On Wednesday, bigger rival Binance withdrew from a bailout of FTX, sending cryptocurrency values tumbling as expectations for a rescue dwindled.
Meanwhile, Sam Bankman-Fried, the CEO of FTX, informed colleagues on Thursday that “over the next week, we will be conducting a raise” in a Slack message viewed by Reuters.
Furthermore, the FTX website announced that it was no longer accepting withdrawal requests or signing up new users. Moreover, users hurried to withdraw $6 billion in cryptocurrency tokens from FTX in just 72 hours, which led to TX’s shortage.
Investors are concentrating on the extent of client losses, which is unknown, and the impact on mood from the most recent and possibly largest crypto market collapse. In fact, this is because the crypto markets have become a minefield for investors.
The native token of FTX, FTT, has lost 90% of its value this week and was trying to stabilize around $2.90, just above its previous low of $1.50. Overnight, Bitcoin went below $16,000 for the first time since late 2020. At 12:10 GMT, it was trading at $16,310, with little indication that it would soon recover.
According to conversations with many persons close to Bankman-Fried and correspondence from both FTX and Binance, the mistakes Bankman-Fried made after stepping in to save other crypto businesses months earlier were what ultimately led to FTX’s demise.
According to Bloomberg, Bankman-Fried warned investors that FTX could face a $8 billion shortfall and that, unless additional capital was provided, the company would have to declare bankruptcy.
Investors were on the lookout for any indications that the trend went beyond the crypto sector.
The majority of cryptocurrency players are still bullish in the long run, but they are preparing for more dips in the immediate term. The 20% decline in Bitcoin this week is comparable to the dip that Three Arrows Capital saw in June.
