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Crypto traders took to Twitter to express shock and disappointment in the wake of crypto exchange FTX’s collapse.

The industry’s history is riddled with major collapses, with many notable ones occurring in 2022. Luna, Three Arrows Capital and Celsius all roiled markets, but the downfall of FTX is perhaps the most surprising to crypto’s Twitter faithful.

Prior to the revelations of liquidity issues at FTX, many crypto traders staunchly refused to believe that the exchange could be going under.

“The past 24 hours have been extremely difficult,” said a crypto trader known as Kaleo. “I took a huge loss, and an exchange I trusted for years is at the center of one of the largest bank runs we’ve witnessed in crypto. I know I’m not the only [one] impacted by this, & my heart goes out to others in a similar situation.” 

Crypto trader Hsaka, who has amassed 392,000 followers on Twitter, weighed in on the vibes in the crypto community having further deteriorated. “Weird concoction of rage, depression, and apathy going on [right now] lol,” he said.

Circle co-founder and CEO Jeremy Allaire yesterday invoked the memory of the Lehman Brothers collapse, one of the signature events of the 2008 financial crisis. In crypto’s relatively short history, the collapse of FTX can be compared to similar monumental events like the downfall of bitcoin exchange Mt Gox.

But for the crypto trader known as Cobie, a decade-long industry participant who has amassed a 754,000-strong Twitter following, FTX is the worst exchange failure ever.

“As a reasonably paranoid long-term crypto user, even I held more on FTX than I have on any other CEX in history at times — thinking it “safer” than the old iterations of exchanges,” Cobie said.  “After two blowups this year that I would’ve never bet on — maybe I’m just getting old and naive.”

Cobie added that he had initially thought there was a less than 1% chance that the exchange would be insolvent.

For others, it was the speed of the blowup that shocked them the most.

“I can’t believe this all unraveled so fast,” said Tree of Alpha, an engineer and trader. They claimed that this was the fastest time in crypto that seemingly baseless claims about a company have ended up with insolvency.

A crypto trader known as Algod, known for his $10 million bet against Luna shortly before it collapsed, said that a large amount of his portfolio remains on FTX. He said: “I’m done with crypto, [I] don’t want to feel like this anymore.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The proposed acquisition of the FTX crypto exchange by rival Binance is bringing European regulators and experts forward — and they’re commenting that the bloc’s new digital asset legislation will mitigate such market spirals in the future.

“The crypto space is not a gambling casino,” Stefan Berger, a social-liberal member of the European Parliament who was a lead negotiator on the Markets in Crypto-Assets legislation expected to pass Parliament early next year. “MiCA is the bulwark against Lehman Brothers moments such as the FTX case,” he added in emailed comment to The Block.

Berger also pointed out that MiCA includes provisions to segregate assets of clients and funds, put in place internal control mechanisms and provide transparency to clients.

“Just like banks, crypto asset service providers need mechanisms that ensure risk management,” continued the MEP.  

After FTX CEO Sam Bankman-Fried shocked the crypto industry by announcing that the exchange’s non-U.S. assets would be sold to Binance, the unfolding drama led to several cryptocurrencies tumbling amid a spiraling market.

“This is very bad for the industry,” said Dimitris Psarrakis, a former European Parliament policy specialist and current advisor on several crypto legislations in the EU institutions. He added: “I suspect that this story was super informative for the regulatory authorities.”

The European Union is on the verge of passing a comprehensive legislation on crypto assets and their service providers, with new laws expected to be enforced in 2024. Until then, financial regulators need to iron out the details of how the regulation will be applied. The European Securities and Markets Authority will be the main body responsible for fleshing out rules on crypto asset service providers. 

The MiCA legislation outlines prudential requirements for crypto asset service providers, such as exchanges, covering capital requirements, investor protection and market integrity. This is especially prominent in MiCA’s Title V, on the authorization of crypto-asset service providers. The process of winding-down activities as a crypto firm is also outlined.

“I suspect that the supervisory authorities now drafting the delegated acts will reach Title V, taking into account what happened between FTX and Binance in order to prevent market failures like that in the European setting in the future,” Psrrakis added.

For Robert Kopitsch, director of a Brussels-based crypto lobbying group, there is a silver lining to the FTX acquisition. “From a political perspective, I can say that it’s always positive if mergers lead to more consumer protection, better services and more security,” he told The Block. “That’s the ideal outcome.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

After turning over more than $51.3 billion in volume over the past 24 hours, crypto exchange Binance currently holds 71% of the spot market for cryptocurrency trading, according to data from The Block Research.

That’s up from just over 55% of the spot crypto market on Oct. 24.

Its next closest competitor, Coinbase, has 9% of the market with over $6.3 billion in 24-hour volume.

FTX, which has paused withdrawals and has signed a letter of intent to sell its non-US assets to Binance, holds a 6% market share with less than $4.5 billion in volume.

Binance accounts for 71% of the crypto spot market. Source: The Block Research

The company’s increased dominance over the spot crypto market coincides with the high-profile news that CEO Changpeng “CZ” Zhao signed a letter of intent to purchase embattled crypto exchange FTX after the exchange paused withdrawals amid a liquidity crunch. The exact extent of FTX’s financial woes is currently unknown.

Should Binance’s acquisition of FTX’s non-US assets go through, its share of the overall crypto market volume would presumably increase further. Binance’s volume dominance also accompanies news that billions of dollars worth of coins and tokens are flowing out of centralized exchanges — roughly $1 billion from Coinbase, alone.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A blockchain-based predictions market is showing increasing skepticism that Binance will complete its non-binding deal to acquire the non-U.S. assets of rival exchange FTX as due diligence gets underway. 

Odds of a completed deal have fallen to 22% as of 10:40 a.m. ET from 47% two hours earlier on the Polymarket platform, which uses smart contracts to let users bet on event outcomes, such as the result of a presidential election. Users are being asked “Will Binance pull out of their FTX deal?”

The platform allows bets using the USDC stablecoin, and odds can react quickly to breaking news. While users gave Republicans as much of an 80% chance of taking control of the U.S. Senate in elections held on Tuesday, those odds fell to just 20% after results started to come in. 

Binance CEO Changpeng Zhao told staff on Wednesday that a “good team” was handling the transaction to buy FTX.com. The surprise news has roiled crypto markets around the globe and prompted speculation about the regulatory response it could trigger. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Bitcoin briefly traded below $17,000 as doubts about whether Binance would follow through on its announced plan to purchase FTX.com continued to roil markets.

Bitcoin hit a low of $16,913 on Coinbase, according to TradingView data, before recovering and trading at $17,169 at 11:06 a.m ET amid significant price volatility.

BTCUSD Chart via TradingView

The latest leg down came after a report by CoinDesk, citing a single person familiar, that Changpeng Zhao’s exchange is unlikely to complete the acquisition after an early examination of FTX’s finances.

The crypto market this week has gyrated sharply around the news of crypto exchange FTX’s collapse and subsequent prospective deal to sell itself to Binance. Numerous crypto assets, including bitcoin, have declined in value, with bitcoin shedding 10% since Tuesday, as The Block previously reported.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Orthogonal Credit, a delegate firm that manages lending pools on Maple Finance, said that earlier this year, it made a decision to not lend to Alameda Research, FTX exchange’s sister trading firm that’s now reeling under a liquidity crisis.

After Orthogonal did its diligence in risk management, it spotted certain “weaknesses” in Alameda ahead of its ongoing crisis, it claimed today without going into specific details.

Orthogonal had previously issued $288 million in loans with a specific pool dedicated to Alameda which started in November 2021 and closed in May 2022. In another pool called USDC01, Orthogonal hasn’t underwritten a loan to Alameda since February 2022.

These so-called weaknesses relate to Alameda’s business practices, the quality of assets it held on its balance sheet as well as the corporate structure of the firm, Orthogonal said. These factors pushed Orthogonal to end its lending ties with Alameda.

Maple is an uncollateralized lending protocol that provides loans to parties without upfront collateral. The loans are managed with pool delegates who check borrowers’ credit worthiness via off-chain metrics to make sure that they are in a good position to repay funds.

“During our Alameda due diligence earlier this year, the team identified a number of key weaknesses: a) declining asset quality, b) unclear capital policy, c) less than robust operational and business practices, and d) an increasingly byzantine corporate structure,” Orthogonal said in a tweet post.

Another Maple Finance delegate M11 also came out saying that it also does not have existing loans to Alameda Research. Both Orthogonal and M11 said while they don’t have pending loans with Alameda, they have limited exposure to FTX via counterparties.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto market maker Wintermute said it has funds stuck on embattled crypto exchange FTX, but that they are within its “risk tolerances” and won’t impact its overall finances. 

Wintermute said in a tweet thread that while its exposure is limited thanks to its risk controls and efforts to remove funds pre-collapse, some money remains. It didn’t say how much. 

“We do have remaining funds on FTX, and while this is not ideal, the amount is within our risk tolerances and does not have a significant impact on our overall financial position,” the firm said.

The disclosure comes as other firms in the industry have sought to allay fears of exposure to FTX after the exchange announced yesterday a plan to sell itself to Binance in the wake of a liquidity crunch. 

Wintermute said it has no exposure to FTX’s exchange token, FTT, the market collapse of which appears to have hastened FTX’s downfall. “As a market neutral trading firm, we do not have any directional exposure to FTT tokens or related ecosystem assets.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

One day after news broke that Binance might acquire the non-U.S. assets of FTX amid a liquidity crunch, CEO Changpeng Zhao told staff that the near collapse wasn’t planned and would likely trigger increased regulatory scrutiny.

“We did not master plan this or anything related to it,” Zhao wrote in a note to Binance employees that he later shared on Twitter. “FTX going down is not good for anyone in the industry. Do not view it as a `win for us.'”

News of the deal shocked the crypto industry on Tuesday and triggered a broad selloff of digital assets. While Zhao had set the chaos into motion over the weekend by saying his exchange would clear its position in FTX’s FTT token, he asked staff to refrain from trading it.

The Financial Times first reported on the memo to staff.

“If you have a bag, you have a bag,” Zhao wrote, referencing the call he held yesterday with FTX CEO Sam Bankman-Fried. “DO NOT buy or sell. As soon as I finished the call with SBF yesterday, I asked our team to stop selling as an organization. Yes, we have a bag. But that’s ok.”

Zhao said that due diligence for the acquisition deal is ongoing, and he asked staff not to talk about the deal publicly. He said he had a “good team” handling the transaction.

The Binance CEO also predicted that regulators worldwide would scrutinize exchanges far more closely in the wake of the FTX collapse.

“Regulators will scrutinize exchanges even more,” Zhao wrote, telling his staff to ignore prices and keep their efforts focused on building products. “Licenses around the globe will be harder to get. And people now think we are the biggest and will attack us more. But that’s OK, we are used to being open and leaning into headwinds.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto prices continued to sink in the wake of Tuesday’s FTX-driven selloff. That doesn’t seem to have scared off Cathie Wood, however, whose Ark Invest bought more than $21 million worth of Coinbase stock, though she did dump $10 million in Robinhood.

Following FTX’s deal with Binance on Tuesday, its token, FTT, initially jumped to close to $20 before crashing below $5. FTT was down 75% over the past 24 hours, according to data via CoinGecko.

Solana’s SOL and serum, also affected by the deal, slumped 33% and 37%, respectively.

Meanwhile, bitcoin fell 10.6% since Tuesday and Ethereum’s ether coin fell by 16%.

Crypto stocks sink

The FTX saga has roiled crypto markets, and the effects are spilling over into equities linked to the cryptocurrency space. Coinbase dropped 4.7%, Jack Dorsey’s Block decreasing 5%, MicroStrategy falling 4% and Robinhood dropping 5%.

Ark added 330,461 Coinbase shares to its Ark Innovation ETF, 54,466 shares to Ark Next Generation Internet ETF, and 36,022 shares to the Ark Fintech Innovation ETF. The asset manager purchased 420,949 shares in total worth $21.3 million.

At the same time, Wood’s fund sold Robinhood shares, shedding 803,788 from the Ark Innovation ETF, 130,400 from the Ark Next Generation Internet ETF, and 86,550 from Ark Fintech Innovation ETF. The fund sold over 1 million shares, worth $9.9 million.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Multicoin Capital, one of the top crypto-focused venture capital firms, is significantly impacted by crypto exchange FTX’s collapse, a letter obtained by The Block shows.

The letter, sent Tuesday by Multicoin Capital managing partners Kyle Samani and Tushar Jain to partners of the firm’s “Master Fund,” shows that around 10% of the fund’s total assets under management (AUM) are still pending withdrawals on FTX.

“Unfortunately, we were not able to withdraw all of the Fund’s assets on FTX,” the letter reads. “Assets including BTC, ETH, and USD are pending withdrawal and represent approximately 15.6% of the assets in the Fund (excluding side pockets) and approximately 9.7% of total Fund AUM.”

Before FTX halted withdrawals on Tuesday, Multicoin Capital was able to withdraw around 24% of the fund’s assets that were held on the exchange, according to the letter. The letter does not mention dollar figures corresponding to the percentages. Multicoin Capital did not respond to The Block’s request for comment by press time.

Direct exposure 

FTX is one of the three exchanges the Multicoin Master Fund trades on, along with Coinbase and Binance, according to the letter. The Sam Bankman-Fried-founded exchange has collapsed amid a liquidity crisis.

Rival exchange Binance reached a deal on Tuesday with FTX for a possible acquisition. If Binance ends up acquiring FTX, then Multicoin expects to be able to recoup 100% of its stuck funds as customers of the FTX exchange. But there is “still a probability” that the transaction does not close, and in that case, Multicoin may not see a full recovery of its assets held at FTX and any recovery would likely be further delayed, the letter reads.

Besides its assets being stuck at FTX, Multicoin Capital also held a liquid position in FTT, the troubled exchange’s native token, and the assets it traded FTT for are also stuck at FTX.

“The Fund held a liquid position in FTT. We took immediate action this morning upon the announcement of Binance buying FTX and sold our entire FTT position at an average price of $17.79,” the letter reads. “While we took the appropriate action, the assets that we traded FTT for (BTC and USD) are still on FTX and the Fund is unable to withdraw that BTC and USD at this time.”

FTT is now trading at roughly $5, according to CoinGecko.

Indirect exposure 

Multicoin Capital also has indirect exposure to the FTX situation, it says in the letter. That is in the form of its positions in the Solana (SOL) and Serum (SRM) tokens.

“The largest position in the Fund is SOL,” the letter reads. It goes to say that since Solana was generally considered to be within Bankman-Fried’s sphere of influence, the FTX situation could mean SOL could likely see increased volatility, and impact its position in the near term. The price of SOL is currently $18.88, down 32% today.

But Multicoin Capital remains optimistic on Solana in the long run, given its growing ecosystem. “We have been long term SOL bulls not because of one person and/or entity but because of the broader ecosystem developing on top of Solana and the nature of Solana’s underpinning technology,” the letter reads. “While the FTX/Binance situation is obviously not helpful to SOL in the near term, we do not believe it impairs the thesis over our investment time horizon.”

As for Multicoin’s position in Serum, it said in the letter that the fund’s SRM tokens unlock over seven years, starting in August 2020 (meaning the fund’s SRM will finish vesting in August 2027). The fund has been selling SRM as it’s been unlocking and has already returned ~30x of its initial investment, per the letter. But the rest of its SRM tokens are designed to unlock directly into custody on FTX.

“There are approximately five years before the side pocket SRM position will be fully unlocked. Given the circumstances, the unlocking process may or may not change moving forward, and we will work to achieve the best outcome for investors,” the letter reads.

Multicoin Capital is taking some actions given the FTX situation. Specifically, it is in the process of reducing the fund’s counterparty exposure by recalling all outstanding collateral. “Outside of the aforementioned exposure to FTX, and the exposure we have to Coinbase (our primary custodian), our only remaining counterparty exposure is with Genesis. This exposure amounts to 1.1% of total Fund AUM and we are working to eliminate it,” the letter reads.

The venture firm is also working on separate communications for partners who are invested in its other funds that are affected by these events, including Venture Fund III, which is an investor in FTX U.S., and the special purpose vehicle or SPV it put together around one year ago to invest in FTX International (the entity Binance made a deal with), according to the letter.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.