Crypto markets sag as funds drained from FTX switch out of ether

NEW YORK: Cryptocurrency prices are struggling in the ongoing crisis sparked by the downfall of Sam Bankman-fried’s once powerful FTX empire.

The largest token bitcoin has shed about 2.5% over two days, while second-ranked ether is roughly 6% lower. Meme token dogecoin – an arbiter of the most speculative animus in an already racy digital playground – is down 12%.

Administrators are picking over the wreckage of the FTX bankruptcy, discovering that Us$3.1bil (Rm14.1bil) is owed to top creditors. The scope of the money outstanding is stoking worries that more digital-asset outfits will topple.

Crypto lender Blockfi Inc could be next: people with knowledge of the matter said last week that it’s preparing to file for bankruptcy within days.

“The FTX issues are really an urgent reminder of the need for regulatory clarity and a real regulatory framework for crypto,” Christian Catalini, founder of the MIT Cryptoeconomics Lab, said on Bloomberg TV.

He added that hype and speculation over the minting and trading of tokens “has generated a massive distraction from building actual products and services that reach consumers, solve actual problems.”

Ether has underperformed bitcoin over the past couple of sessions in part amid speculation that some of the Us$663mil (Rm3bil) drained from FTX as it slid into bankruptcy is now being transferred out of the token.

The person or entity that raided FTX emerged last week as one of the world’s biggest holders of ether, with a haul of about Us$288mil (Rm1.3bil).

Blockchain specialist Chainalysis said in tweets Sunday that funds taken from FTX “are on the move” and some were being shifted from ether to bitcoin, likely as part of an effort to “cash out.”

The heady mix of corporate failure and potential criminality atop a 72% drop in a gauge of the top 100 tokens over the past year is naturally leading to all kinds of questions about the future – or lack thereof – for digital assets and their underlying blockchain technology.

Pershing Square Capital Management founder Bill Ackman said on Twitter that crypto represents less than 2% of his assets while adding that he remains positive on the sector overall, comparing its potential social impact to the telephone and the Internet.