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Crypto markets pull back from brink in respite from FTX rout

Crypto markets pull back from brink in respite from FTX rout
Logos for Binance Coin, top, Ether, left, and Bitcoin inside a cryptocurrency exchange in Barcelona. (Photo: Angel Garcia/Bloomberg)

Cryptocurrencies regained some ground following Wednesday’s plunge, offering investors a respite from a rout fuelled by Binance’s withdrawal of its offer to buy FTX.com.

Bitcoin rose as much as 4.4% after tumbling as low as $15,574, a level unseen since November 2020. Ether climbed 3.6%. The MVIS CryptoCompare Digital Assets 100 Index was down 3.9% as of 10.23am in Singapore on Thursday, after having fallen as much as 6.8%.

“Expect the unexpected in the days ahead,” Genesis Trading analysts Ainsley To and Gordon Grant wrote in a note on Wednesday that highlighted the explosion of volatility across the crypto-markets complex.

Crypto markets have been roiled by the saga involving FTX, which until just a few days ago was seen as one of the top entities, with charismatic founder Sam Bankman-Fried seen as the crypto’s version of John Pierpont Morgan. Its FTT token plunged amid concerns fuelled by Twitter comments from Binance co-founder Changpeng “CZ” Zhao, and is now below $2 after trading near $25 just a week ago. Bankman-Fried and Zhao co-announced a non-binding offer by Binance to buy FTX, which was then scrapped on Wednesday.

“Since I entered the crypto industry in 2016, very few periods tested its market infrastructure and participants” the way the turmoil of recent days did, said crypto hedge-fund manager Dan Liebau of Modular Asset Management.

Value loss

Bitcoin, the largest token by market value, had plunged almost 16% on Wednesday. It reached a record high of almost $69,000 a year ago. FTT, the utility token of the FTX exchange, is down 92% this week, and was trading around $1.94.

The FTX-Binance saga calls to mind the turmoil involving Celsius – the crypto lender that collapsed earlier this year – as well as those seen by other firms that were engulfed in this year’s crash in digital assets.

The chaos also attracted the attention of regulators and legislators.

“What we’ve seen in the last two days, if I can step back from it a bit, is really part of a pattern,” US Securities & Exchange Commission chair Gary Gensler said on Bloomberg Television. “Investors get hurt when we don’t rely upon the time-tested public policy guardrails we’ve put in place over the decades.”

He cited opacity, using other people’s money, leverage and inter-connectedness as risks in the digital-asset sector.

As for potential effects, concerns about the recent events may deter some firms which were previously tempted to enter the space.

“This is going to give pause for more traditional financial institutions,” Soona Amhaz, general partner at Volt Capital LLC, said on Bloomberg Television. BM/DM

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