This Week in Coins: Bitcoin Avoids Big Losses as FTX Contagion Spreads

This being week two of the FTX disaster story, crypto investors can expect things to get worse before they get better. However, the two market leaders, Bitcoin and Ethereum, no longer appear to be in free fall.

Bitcoin (BTC), the largest cryptocurrency by market cap, fell just 1% in the past week and is trading at $16,655. Ethereum (ETH), the No. 2 cryptocurrency, shaved about 4% off its value and is trading at $1,210 at the start of the weekend.

Both thought so return on Tuesday after fresh data from the US Department of Labor’s latest PPI (Producer Price Index) report showed a decline in commodity costs excluding food and energy. Many took it as a sign that inflation in the US could finally calm down, which would give the Federal Reserve some encouragement to ease its tight fiscal policy. Shares also rose after the news.

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Several leading cryptocurrencies fell between 5% and 10% this week, including Cardano (ADA), Polygon (MATIC), and popular dog meme coins Dogecoin (DOGE) and Shiba Inu (SHIB).

The biggest loser among the top twenty cryptocurrencies by market capitalization was Solana (SOL), which fell 17% to $13.31. FTX was one of Solana’s earliest supporters and the entire Solana ecosystem is affected by the implosion; the blast radius included layoffs at the Solana NFT protocol Metaplex.

The full extent of the Solana network’s ties to Sam Bankman-Fried’s collapsed multi-billion dollar crypto empire came to light this week, along with declarations of exposure to FTX from several other leading companies in the industry.

FTX infection spreads

As prices stabilized this week, there were a number of industry revelations as companies came forward to declare the extent of their exposure to the bankrupt FTX.

On Monday, crypto lender BlockFi denied claims that the majority of its assets were tied up in FTX, but told clients that withdrawals will remain paused, citing “significant exposure” to the collapsed stock market. BlockFi had suspended customer withdrawals last week. The company is also considering applying for Chapter 11 bankruptcy, Decrypt reporting confirmed, and likely face imminent layoffs.

Crypto hedge fund Ikigai admitted to having a “large majority” of its total assets tied up in FTX, in a chirping by founder Travis Kling. Kling also apologized for investing customer funds in FTX and for having “actively supported it.”

The Solana Foundation published a blog posts disclosed that it had $1 million in cash or equivalent assets tied up in FTX. Furthermore, the foundation holds 3.24 million shares of FTX Trading LTD common stock, 3.43 million FTT tokens and 134.54 million SRM tokens from decentralized exchange Serum. Bankman-Fried co-founded Solana-based DEX in 2020.

The foundation’s disclosure also clarified the extent to which Bankman-Fried had invested in the network’s token. FTX and Alameda had together purchased 50.5 million SOL, currently worth just south of $666 million.

On Tuesday, the crypto-centric investment company Sino Global disclosed in a official statement that it had “middle of seven digits” exposure to FTX, but it continues to function as normal.

Crypto exchange Liquid Global on Tuesday froze all outlets, including fiat, “in accordance with the requirements of voluntary Chapter 11 proceedings in the United States.” Liquid Group and all its subsidiaries, including the Japan-based Quoine Corporation and Quoine Pte. in Singapore, was acquired by FTX Trading Ltd in an undisclosed deal earlier this year.

Circle, issuer of stablecoin USDC, admitted in a regulatory filing that “little equity” position in FTX that CEO Jeremy Allaire alluded to immediately after FTX’s collapse constituted a 10.6 million dollars investment. The filing said Circle expects financial performance to be “significantly lower” than last February’s projections.

Wednesday morning, crypto prime broker Genesis announced to clients that it would halt withdrawals from its lending arm, citing “unprecedented market turmoil” from the FTX bankruptcy. Only one week before the company had tweeted: “Our working capital and net positions in FTX are not material to our business. Circumstances surrounding FTX have not impeded the full operation of our trading franchise.”

Even blockchain analytics firm Chainalysis, in documents filed with Delaware bankruptcy court, was identified as one FTX creditor and owes money in the bankruptcy proceedings.