Crypto domino effect pending as FTX brings down BlockFi: Thai expert
Cryptocurrency lender BlockFi, which filed for bankruptcy protection this week, is among the first victims of a domino effect caused by the collapse of Bahamian cryptocurrency exchange FTX earlier this month, according to a Thai crypto expert.
Sanchai Popli, CEO of Cryptomind Advisory Ltd, said on Tuesday it remained to be seen whether the domino effect would cause a catastrophic impact on the cryptocurrency market.
“I believe several crypto operators are at risk of bankruptcy, especially those who have been borrowing digital assets at a ratio far higher than their own assets,” he said. “Also, investors affected by these collapses will have to wait a long time for the debt settlement process before they can get their money back.”
Thailand has become a major crypto-trading hub in Asia, logging over US$100 billion in transactions per year. Thai crypto traders lured by the high-risk asset were badly burned when local exchange Zipmex froze withdrawals after being caught in the market meltdown earlier this year.
The filing in a New Jersey court comes as crypto prices plummet. The price of bitcoin, the most popular digital currency by far, is down more than 70% from its 2021 peak.
FTX filed for protection in the US earlier this month after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.
FTX bought BlockFi in June this year for $25 million, 99% lower than the company’s estimated value of $4.8 billion.
BlockFi said its liquidity crisis was due to its exposure to FTX via loans to Alameda, a crypto trading firm affiliated with FTX, as well as cryptocurrencies held on FTX's platform that became trapped there. BlockFi listed assets and liabilities of between $1 billion and $10 billion, Reuters reported.
BlockFi now has $256.5 million in cash on hand. The company insisted that it would continue paying employees’ salaries and would employ a cost-reduction strategy to maintain the company’s stability.