FTX’s collapse throws crypto market into chaos
The abrupt collapse of FTX, the world’s third-largest crypto exchange, is affecting more than 10,000 retail and corporate investors, leading to major market disruptions.
Ever since the company initiated its U.S. bankruptcy processes recently, major cryptocurrencies and FTX’s FTT tokens have been on a sharp decline. Bitcoin was priced around $21,000 on Nov. 6, but plunged below $16,000 on Nov. 10 when fears of the firm’s liquidity crisis started heightening in Korea and abroad. As of Sunday at 2 p.m., the world’s leading cryptocurrency was being traded at $16,800, according to data from market tracker CoinMarketCap.
Other cryptocurrencies also extended losses during the same period. Ethereum’s price fell by around 25 percent over the past week due to the massive liquidity crisis, with FTX reporting liabilities of up to $50 billion.
According to data from app market tracker Mobile Index, the number of daily average users in Korea for FTX’s crypto trading app FTX Pro reached 3,147 as of Nov. 7. More than 10,000 Korea-based investors are feared to lose their invested capital following FTX’s latest decision. The app saw 10,140 monthly active users based in Korea last month, according to data from the company.
The price of FTT has also showed a sharp downward trajectory over the past week. It was traded at $22 a week earlier, but tumbled to less than $2 on Sunday, a drop of more than 90 percent.
This situation is reminiscent of the crypto fiasco regarding the Terra-Luna ecosystem in May. The value of the once-red-hot Luna token also lost its value close to the zero level after about a week once the Terra stablecoin lost investors’ confidence when it started losing its indented $1 peg.
Korea’s major cryptocurrency exchanges also issued a warning against the volatile market sentiment soon after the FTX debacle erupted last week.
The Digital Asset eXchange Alliance (DAXA), a joint consultative body of the nation’s top five crypto exchanges, advised local investors to pay extra attention before making investments.
“The crypto market is widening volatility due to the problem at the overseas exchange and its affiliates,” it said in a joint statement. “Investors should take extra precautions.”
Among corporate-level investors, Com2uS is expected to take a direct hit from FTX’s collapse, as the Seoulbased game developer listed its C2X token on the crypto exchange in March. Given that it started making crypto inroads via FTX, the company is feared to suffer losses due to the fallout of the exchange.
But the overall financial damage caused by the FTX bankruptcy appears not to be as serious as that of the Luna collapse, as FTX did not engage in official business activities here by reporting to local financial authorities.