Bitcoin fell to more than a two-year low in Tuesday trading in Asia as investors drove most cryptocurrency prices lower on concerns the collapse of the cryptocurrency exchange on Nov. 11 may threaten to bankrupt other businesses exposed to the platform. 

The world’s leading cryptocurrency fell as low as US$15,599 and traded at US$15,733 at 5 p.m. in Hong Kong, a drop of 1.08% in 24 hours, according to CoinMarketCap.

Bitcoin is trading at prices last seen in September 2020, or before the bull run of 2021 when it reached a high of US$68,000. It has now slumped 77% from that peak. 

Ether also fell below its US$1,100 support level, hitting a five-month low of US$1,084 before recovering to US$1,087.29. 

Igneus Terrenus, director of public liaison at crypto incubator Davion Labs, told Forkast the risks of contagion from FTX are weighing heavy on the market.

“A lot of things are happening this week… and a lot of it is actually very negative,” he said.

Who’s next?

Much of the crypto market’s attention is focused on the state of finances at companies with exposure to the now bankrupt FTX exchange, which includes Crypto investment bank Genesis Global Trading, owned by the venture capital Digital Currency Group. 

It announced a pause in withdrawals last week at its brokerage arm Genesis Global Capital, which held about US$2.8 billion in deposits, according to its quarterly report through September.

New York-based Genesis Global Trading said its decision follows “abnormal withdrawal requests” which exceeded current liquidity at Genesis Capital. This raised concern it faces funding shortfalls related to the FTX collapse, which in turn is raising questions about how many other businesses are in a similar situation.

On Nov. 16, Genesis tweeted: “We have hired the best advisors in the industry to explore all possible options.” It added it will deliver a “plan for the lending business” this week.

Billionaire Barry Silbert, 46, a former investment banker, runs Digital Currency Group (DCG), which lists seven main subsidiaries on its website, including Genesis and digital asset manager Grayscale, which oversees US$28 billion worth of Bitcoin, Ether and other assets.

“DCG is a very big company, and unless they’ve engaged themselves in fraudulent activity – which I don’t think they have – I think they will be okay,” Justin D’Anethan, the institutional sales director at Hong Kong-based digital asset platform Amber Group, told Forkast.

“But then it’s more about them basically severing a limb and letting Genesis fail or finding some kind of solution in the last minute,” he added. “But I think Digital Currency Group will be fine.”

Ether shorts

A CoinShares report released Monday added to the market pessimism, showing there was a record US$14 million worth of short bets on Ether in the seven days to Nov. 18.

Short bets indicate the number of investors expecting the price of an asset to fall and shorts across the whole market represented 75% of the total in the period, according to the report. 

The report credited this bearish sentiment on Ether to the alleged US$600 million hack of FTX on the day it filed for bankruptcy and concern about the upcoming Shanghai update on the Ethereum network, which will allow for the withdrawal of staked assets.

Onchain data shows that the wallet address connected to the supposed FTX hacker transferred 180,000 Ether (roughly US$200 million) to 12 wallets on Monday, according to Etherscan

The XRP token went against the downtrend in early morning trading, and as of 5 p.m. in Hong Kong it gained 1.34% to US$0.35 amid a series of companies filing briefs in recent days to support Ripple Labs Inc., whose payment network is powered by XRP, in its legal tussle with the U.S. Securities and Exchange Commission (SEC).

The SEC sued Ripple in 2020, saying it raised US$1.3 billion through XRP and this represented a sale of unregistered securities.

The Matic token of the Polygon blockchain gained more than 1.3% in afternoon trading, but it’s still more than 14% off for the past seven days.

The downturn in the crypto market is also weighing on valuations of crypto firms listed on equity markets. 

U.S.-based crypto exchange Coinbase Global Inc.’s valuation fell to under US$10 billion on Monday for the first time since the company went public in April last year. It was valued as high as US$76.9 billion in November 2021.

The company’s share price fell 8.9% on Monday to US$41.23.