Aftershocks from the massive earthquake in the trillion-dollar crypto industry last week continued to reverberate on Monday.
Prices of digital currencies fell again as the crisis engulfing the market deepened over the weekend. Bitcoin, the world’s biggest cryptocurrency, has plummeted about 65% so far this year. It was trading at about $16,500 on Monday, according to CoinDesk. Analysts believe that it could fall below $10,000.
Ether, the world’s second most valuable cryptocurrency, isn’t faring much better. It was trading at about $1,230 on Monday, having sunk over 20% over the last week, CoinDesk data showed.
The plunge comes as investors continue to grapple with the stunning implosion of FTX, one of the biggest and most powerful players in the industry.
Some industry insiders have said the company’s downfall had triggered a “Lehman moment,” referring to the 2008 collapse of the investment bank that sent shockwaves around the world.
The episode has not just destroyed confidence in the crypto industry, but will also embolden global regulators to tighten the screws. Some of the biggest names in the business said they will welcome the scrutiny, if it helps restore faith in the industry.
There is a “lot of risk,” said Changpeng Zhao, who runs Binance, the biggest crypto exchange. “We have seen in the past week things go crazy in the industry, so we do need some regulations, we do need to do this properly,” he added.
CZ, as he’s known, was speaking at a conference in Indonesia on Monday. He said last week that comparing the current crypto turmoil to the 2008 global financial crisis is “probably an accurate analogy.”
Binance had reached a tentative rescue deal with FTX earlier last week, but that transaction almost immediately fell apart.
FTX has continued its downward spiral after filing for bankruptcy on Friday. Another big name from the industry has also admitted to mishandling funds, spooking investors even more.
Here is how things have unfolded over the last few days, showing the crisis has only just begun.
Criminal investigation in The Bahamas
FTX moved its headquarters from Hong Kong to The Bahamas last year, with former CEO Sam Bankman-Fried hailing it as “one of the few places to set up a comprehensive framework for crypto” at the time.
On Sunday, the authorities in The Bahamas said they were investigating potential criminal misconduct surrounding the company’s implosion.
“In light of the collapse of FTX globally and the provisional liquidation of FTX Digital Markets Ltd., a team of financial investigators from the Financial Crimes Investigation Branch are working closely with the Bahamas Securities Commission to investigate if any criminal misconduct occurred,” the Royal Bahamas Police Force said in a statement.
It’s not clear which particular aspect of the swift collapse of FTX authorities are investigating.
Bankman-Fried, the 30-year-old founder of the exchange, was one of the faces of the crypto industry, amassing a fortune once totaling $25 billion that has since vanished. He had been viewed as the crypto world’s white knight, stepping in previously to rescue companies struggling after the collapse of the TerraUSD stablecoin in May.
FTX, backed by elite investors like BlackRock and Sequoia Capital, rapidly became one of the biggest crypto exchanges in the world. Its collapse was preceded by the decision to lend billions of dollars’ worth of customer assets to fund risky bets by Alameda, Bankman-Fried’s crypto hedge fund, The Wall Street Journal reported on Thursday.
A possible hack
The Bahamas probe came a day after the bankrupt exchange said it was launching an investigation of its own.
On Saturday, FTX said it was looking into whether crypto assets were stolen. Crypto risk management firm Elliptic said $473 million in crypto assets appear to have been nabbed from FTX.
FTX General Counsel Ryne Miller said Saturday the company “initiated precautionary steps” on Friday and moved all its digital assets offline. The process was expedited Friday evening “to mitigate damage upon observing unauthorized transactions.”
Miller said that FTX was “investigating abnormalities” regarding movements in crypto wallets “related to consolidation of FTX balances across exchanges.”
The facts are still unclear, and the company will share more information as soon as possible, he added.