The collapse of crypto exchange FTX has rippled across the crypto industry, but the ultimate effects have yet to be seen as the trading firm’s complex web of relationships continues to unravel.
One of the largest global crypto exchanges, FTX holds deposits for a number of large investors in the crypto industry.
FTX also has close ties to Alameda Research, one of the largest investors in the industry. Both firms were founded by Sam Bankman-Fried, and Alameda holds large stakes in many crypto projects and tokens, including Solana, which dropped precipitously this week.
The effects weren’t limited to FTX-linked tokens. Ether and bitcoin dropped in a broad sell-off, with bitcoin hitting a two-year low.
The fallout from FTX comes after the bankruptcies of Three Arrows Capital, Celsius, Voyager, and others earlier this year following the collapse of the UST and luna cryptocurrencies. Those failures also had effects that could be seen across the industry.
Crypto industry watchers are wondering who else could be affected. As in those past incidents, the counterparties of these entities aren’t always known.
Alameda is the most closely watched. Of the $14.6 billion in assets it held as of June, $5.82 billion was in FTX’s native FTT token or other “FTT collateral,” according to a CoinDesk report on FTX’s ties to Alameda that helped spark the current crisis.
Solana was Alameda’s second-largest holding with $1.16 billion in “unlocked SOL” or “locked SOL.” (Locked tokens are harder to liquidate.)
The revelation of Alameda’s potential need to raise capital and sell Solana may have helped drive a steep drop in the price of Solana to $13.46, down more than 43% in the past 24 hours.
Bankman-Fried publicly supported Solana and helped launch Serum, a decentralized exchange running on the Solana blockchain.
Crypto.com stopped withdrawals of USDC and USDT on the Solana blockchain Wednesday out of an “abundance of caution,” CEO Kris Marszalek wrote on Twitter, citing FTX’s role in trading Solana-based stablecoins and operating a Solana bridge.
However, Circle said that native USDC on Solana was running normally. "Choices that market participants make with regard to enabling USDC deposits and withdrawals on their platforms are their choices, not Circle’s,” a Circle spokesperson said. “Native USDC is flowing on Solana normally and can be deposited or withdrawn via the Circle account."
Solend, one of the larger Solana lending protocols, reported it was having problems liquidating part of a large loan Wednesday morning. It also disabled all borrowing, according to its website. Solend cited congestion issues as the cause of the issue and later said liquidations had resumed.
Solana Labs CEO Anatoly Yakovenko, whose company helped develop the Solana blockchain and its corresponding token, tweeted that his company didn’t have any assets on FTX and estimated his company had two and a half years of runway. “We launched in 2020 after markets crashed and the world went into lockdown — chewing glass is in our DNA, and we'll get through together,” he wrote.
A widening effect
Alameda itself had exposure to several other crypto lending outfits that had collapsed earlier this year, including Voyager, to which it said it would repay $200 million in September, and BlockFi, which FTX backed with a line of credit earlier this year.
On-chain activity showed Alameda had loans on several DeFi lending protocols, analysts said.
The effects of FTX’s crisis will take time to become clear. But with the size of the entities involved, and the large investors involved either directly or as counterparties, there’s almost certain to be more fallout. The greatest irony, given the blockchain’s supposed virtues of transparency, may be just how little we know.
