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FTX crash: Crypto bear market to extend till late 2023


FTX the once-dominant crypto exchange, has failed just as the cryptocurrency market was beginning to see “an emerging bullish setup”. This followed significant deleveraging in May and June that left few marginal sellers in the ecosystem. According to a new study report by Coinbase Global, the swift decline of FTX will perhaps prolong the cryptocurrency bear market by several more months, possibly through the end of 2023.

Allocators have found it challenging to make meaningful capital deployments for the majority of asset classes in recent months due to the financial markets’ constant stop-and-start behavior. Before the perceived ‘clash” between Binance and FTX in early November, which caused panicked withdrawals on the latter, the major cryptocurrencies have mostly been insulated from huge price swings since early July. This swiftly intensified into more widespread market turbulence, raising worries about possible systemic danger.

Coinbase has in a post stated that they expect TFT to take a second “second-order effects” coming to light from the unraveling of FTX, “as it emerges which counterparties may have lent or interacted with either FTX or Alameda and what those exact liabilities are.” Remember that SBF’s quantitative trading company, Alameda Research, was a major factor in the collapse of the 30-year-old’s crypto empire.

“There is little question that the crash will postpone the crypto spring,” according to Bradley Duke, founder, and CEO of ETC Group. He also notes that “investor confidence in crypto has taken a serious knock and the repercussions from this event will continue to be felt for some time.”

Could FTX have a hole in its financial sheets?

It has recently come to light that FTX might have an $8–10 billion hole in its financial sheet, which could be related to a loan or loans to Alameda that were pledged with FTT as collateral and funded by customer deposits. Onchain data implies that transfers of FTT to Alameda took place during the Terra, Celsius, and Three Arrows Capital failures in 2Q22, indicating that the market hasn’t yet recovered from the deleveraging consequences of those unwinds. Due to FTT’s 85% depreciation versus the US dollar between November 6 and November 10, margin calls on any existing loans were probably issued.

Sam Bankman-Fried, and his (former) CEO, acknowledged in a tweet that the present solvency issue was the result of an incorrect calculation of customer margin discrepancies. 

Since then, the business has declared bankruptcy, joining Trading Ltd, FTX US, Alameda, and 131 other connected entities. However, given that there are no clear commercial law precedents for cryptocurrencies and the fact that many transactions took place abroad, we think the case may have major legal complexities attached. Although the issue has contributed to market turbulence more generally, the bankruptcy proceedings may reduce the likelihood of contagion as US courts search for a secure resolution.


This week, “Enron man” John Ray III, who oversaw the company’s clean-up following its widely reported crisis, was appointed as the new CEO. Ray wasted no time in criticizing the former FTX leadership. Sam Bankman-Fried, the company’s founder, and his executive team were accused of showing a “total breakdown of corporate controls.”

FTX’s declaration for bankruptcy also produced several shocking revelations. For starters, Alameda Research, FTX’s sister company, was covertly protected from exchange liquidations. The paper also demonstrated how private keys and other sensitive information were accessed through insecure group emails.

Another salvo in the saga saw a significant update this week. This time it was the entity believed to have hacked the platform during the initial collapse. Dubbed “FTX drainer,” this wallet is now a major Ether holder.

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