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.
BlockFi filed for Chapter 11 bankruptcy protection on Monday, becoming the latest industry casualty after being hurt by exposure to the collapse of FTX, Reuters reported on Tuesday.
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.
