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SPIRIT Blockchain – Weekly Wrap-up 11/11/2022

Here’s what happened in blockchain and crypto this week.

The liquidity crisis and bankruptcy of crypto exchange FTX sent shockwaves through the crypto industry this week. After the world’s largest trading venue Binance chose not to go ahead with a nonbinding offer to acquire the firm following a review of the company’s finances, FTX halted withdrawals and filed for Chapter 11 bankruptcy in the US this morning. FTX Group, which includes the FTX.com entity, FTX US, Alameda Research and more than 100 affiliated companies have all filed for bankruptcy proceedings, according to a company press release. CEO and founder Sam Bankman-Fried resigned along with the firm’s institutional sales and legal teams. The headlines surrounding FTX triggered a sharp selloff in crypto markets, with Bitcoin dropping below $16,000 for the first time since 2020. The FTX contagion has rapidly spread to other firms and crypto projects associated with FTX.
 
While the exact course of events ahead of the dramatic events is not fully understood, FTX’s downfall probably began months earlier, when Sam Bankman-Fried (also referred to as SBF) made the decision to save its trading unit Alameda and other crypto firms amid the collapse of stablecoin blockchain Terra, hedge fund Three Arrows Capital and crypto lender Celsius. FTX reportedly lent about $10 billion to its sister company and trading firm Alameda Research, according to a WSJ report, including customer funds that were deposited by clients on the exchange for trading purposes. Reuters reported that SBF did not inform other FTX executives about the transfer of funds to Alameda because he was afraid of leaks. 
 
Prior to today’s bankruptcy filing, SBF apologized in a long Twitter threadfor the chaos his firm has caused in crypto industry ensuing FTX’s liquidity crisis. There is no doubt that the fallout of the FTX implosion for crypto is far-reaching. So far, industry heavyweights including Genesis Trading ($175 million), Galaxy Digital ($77 million), CoinShares ($30.3 million), Blockfi (halting withdrawals) and Hodlnaut ($13 million) have disclosed exposure to FTX, with many others likely to be impacted insofar as their funds are stuck on FTX. Some of the firm’s venture investors such as Sequoia have already written down the value of their stake in FTX. 
 

Meanwhile, regulators across the globe have announced investigations into the failure of the crypto exchange, including the SEC and CFTC. Yesterday, Bahamas-based FTX Digital Market’s assets were frozen by The Securities Commission of the the Bahamas. Elsewhere, stablecoin issuer Tether (USDT) has frozen 46 million of USDT owned by crypto exchange FTX at the request of law enforcement.

 

Market Overview
 

The global cryptoasset market capitalization currently amounts to $894 billion –  down from $1.09 trillion since Friday last week, with bitcoin accounting for 36.3%. Among the Top 30 cryptoassets by market cap, Polygon (MATIC) outperformed, gaining 7.7% over the week. During the same period, the price of bitcoin (BTC) decreased  by 16.6% to $16,850 while the price of ether (ETH) fell by 17.8% to $1,258. The total value locked (TVL) in DeFi sits at $55.3 billion – up from the $44.8 billion last week – with Ethereum accounting for about 57.5% of TVL.

 

This Week’s Headlines

 

Notable Deals and Fundraising

  • Crypto payments firm Ramp raises $70 million in a Series B round
  • Crypto compliance firm TRM Labs raises $70 million
  • Crypto exchange Coinmetro raises funds at $180 million valuation
  • Digital assets exchange Archax raises $28.5 million in a Series A round
  • Freelancer-focused neobank Ping raises $15 million in a seed round
  • Decentralized search startup Sepana raises $10 million
  • Web3 gaming company Eterlast raises $4.5 million in a seed round
  • Web3 gaming infrastructure startup Xternity raises $4.5 million
  • Founders of NFT game Visionrare raise $1.5 million for “fantasy startup investing”
  • European crypto venture firm LeadBlock Partnerscompletes first close of $150 million fund

 

Manuel Trojovsky, Head of Crypto Investments & Research

 

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