Crypto meltdown

IT is not surprising when things go awry in the largely unregulated world of cryptocurrencies. This time around it is the crash of one of the world’s largest cryptocurrency exchanges called FTX.

The cause: take your pick. Because of the unregulated nature of cryptocurrencies, all sorts of transgressions often take place. Crypto exchanges not only trade other cryptocurrencies, they also issue their own tokens.

FTX had a sister company that owned the bulk of its tokens.

Surprise surprise, the market didn’t know this until recently. Then that realisation caused a loss of confidence among holders of the token who began dumping it. That in turn caused a crash in the value of those tokens and in turn caused a liquidity crisis at the FTX exchange.

While this sort of shenanigans often takes place in the crypto world, what is surprising in the case of FTX is that some of the top investment funds in the world had decided to invest in FTX during earlier funding rounds. They are now licking their wounds. World famed venture capital firm Sequoia Capital said it would mark down to zero its investment of over Us$210mil (Rm1.2bil) in FTX, as possibilities of bankruptcy of the latter loom. There were other big names who took a bet on FTX.

Bloomberg reported on Thursday that the clock is ticking for other FTX investors to write down investments and that these include big names such as Blackrock Capital Investment Corp, Tiger Global Management LLC, Ontario Teachers’ Pension Plan Board, Temasek Holdings Pte and Softbank Group Corp.

Aptly, Minneapolis Fed president Neel Kashkari piped in this week on his take the world of cryptocurrencies.

“It’s kind of the wild Wild West and chaos all rolled into one,” he is reported to have said on the FTX saga and cryptocurrencies in general.