Investors are withdrawing record levels of bitcoin from crypto exchanges
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Investors are pulling record levels of bitcoin from crypto exchanges as the collapse of Sam Bankman-Fried’s FTX raises fears about the safety of their assets.
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FTX, once the darling of the crypto industry, filed for bankruptcy protection in mid-November after an $8 billion hole appeared in its balance sheet.
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New CEO John Ray described a lack of basic risk management and Bankman-Fried has admitted poor internal controls. The rapid decline has spooked investors who hold and trade their assets on other centralized crypto exchanges, prompting record levels of withdrawals from bitcoin, the most traded crypto token. FTX failed last month with potentially more than one million creditors, including many who had left assets on the exchange.
Last month, investors withdrew 91,363 bitcoins, worth a total of nearly $1.5 billion based on the November average price of around $16,400, from centralized exchanges including Binance, Kraken and Coinbase. It marked the largest bitcoin outflow on record, according to data from CryptoCompare. It is unclear whether the coins are sold or moved to private wallets.
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In the first seven days of December, 4,545 bitcoin were withdrawn from centralized exchanges, compared with inflows of 3,846 bitcoin in the same period last year, according to CryptoCompare.
In a sign of the damaging impact of FTX’s collapse on the once-rival exchanges, credit rating agency Moody’s placed US-listed Coinbase’s bond rating on review for downgrade in late November, citing “the increasing likelihood of sustained declines in trading volume and client engagement.” , two important revenue drivers”.
“Falling crypto asset prices will limit companies’ ability to raise funds and reduce customer demand,” Moody’s analysts wrote this week. They added that markedly lower crypto prices “will degrade the credit quality of centralized financial companies”.
“While bitcoin sales are slowing, the damage is done,” Eric Robertsen, global head of research at Asia-focused bank Standard Chartered, wrote this week.
He predicted that the pain for crypto investors will continue well into 2023. “More and more crypto firms and exchanges find themselves with insufficient liquidity, leading to further bankruptcies and a collapse in investor confidence in digital assets,” he added.
© 2022 The Financial Times Ltd
