[Bitcoin Now] Direct Hit from FTX Bankruptcy Protection Filing... Frozen Investor Sentiment

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] The global cryptocurrency exchange FTX, facing a liquidity crisis, has ultimately filed for bankruptcy protection, causing the price of the leading cryptocurrency Bitcoin to weaken.

According to the global cryptocurrency market tracking site CoinMarketCap, as of 1:51 PM on the 12th, the price of Bitcoin was recorded at $16,802 (approximately 22.16 million KRW), down 1.67% from the previous day. This is the lowest Bitcoin price since November 2020. Ethereum rose 2.04% to $1,264 (about 1.67 million KRW), but most coins showed a downward trend. Ripple traded at $0.37 (about 488 KRW), down 2.38%, while Dogecoin and Solana also fell by 3.76% and 4.58%, respectively.

The Bitcoin price weakened after FTX, which faced a liquidity crisis and a bank run (a situation where customers withdraw coins all at once), ultimately filed for bankruptcy protection under Chapter 11. On the 11th (local time), FTX announced on Twitter, "We have voluntarily initiated bankruptcy protection procedures to liquidate assets and begin an orderly review process for the benefit of all stakeholders worldwide." Chapter 11 of the U.S. Bankruptcy Code refers to a system that seeks rehabilitation through restructuring under the supervision of the bankruptcy court.

FTX filed for bankruptcy protection after Binance, the world's largest exchange, initially expressed intent to acquire it but withdrew the offer within a day. FTX reported to the court that its liabilities exceed 66 trillion KRW. The debts range from $10 billion to $50 billion (13.2 trillion to 66.2 trillion KRW), with assets of a similar scale. There are more than 100,000 creditors. Sam Bankman-Fried, CEO of FTX, attempted to raise emergency funds amounting to $9.4 billion after Binance withdrew but failed and resigned from his position.

Despite the U.S. stock market closing higher in sympathy with FTX's bankruptcy filing, cryptocurrency prices remained weak. The Nasdaq index closed at 11,323.33, up 209.18 points (1.88%) from the previous session. The S&P 500 index, focused on large-cap stocks, rose 36.56 points (0.92%) to 3,992.93, and the Dow Jones Industrial Average increased by 32.49 points (0.10%) to 33,747.86. The U.S. Consumer Price Index (CPI) for October rose 7.7% year-over-year, lower than expected, raising expectations that the Federal Reserve will slow the pace of tightening starting in December. Due to these factors, Bitcoin prices had risen more than 8% the previous day but took a direct hit from FTX’s bankruptcy filing on this day.

As most coin prices weakened, investor sentiment also cooled. According to cryptocurrency data provider Alternative, the Fear & Greed Index, which measures investor sentiment, dropped 4 points from the previous day to 21 points (extreme fear). Alternative’s Fear & Greed Index ranges from 0, indicating extreme fear and pessimism about investing, to 100, indicating optimism.