Crypto still in storm

The phrase "crypto contagion" is being increasingly bandied about with another industry player reportedly exploring bankruptcy and an assortment of companies apparently unable to access their capital following the collapse of FTX.

Remarkably, the exchange’s disgraced founder Sam Bankman-Fried is said to be trying to raise new capital.

Also noteworthy, considering all the turmoil, is that the largest, most closely watched crypto, as of early Wednesday, stood mostly unfazed.

Bitcoin, as of 9:20 a.m. (EST), was about $16,500, having shed 2.2% in 24 hours.

Meanwhile, several Top 100 coins are in the green. No. 30 Algorand, a layer-1 chain boasting of carbon neutrality, saw its native asset pop by as much as 5% yesterday. ALGO is +2.6% over 24 hours, perhaps stirred up at least in part by yesterday's announcement by the Algorand Foundation that it had recruited a new head of ecosystem growth, Min Wei, formerly the head of partnerships at Blockchain.com.

Swept up in a cascading credit squeeze, BlockFi is said to be exploring Chapter 11 bankruptcy, said the Wall Street Journal.

Last Friday, the troubled crypto lender put a pause on customer withdrawals, citing a “lack of clarity” on the status of FTX, to which it was exposed. FTX extended BlockFi a credit line after the fall of Three Arrows, Celsius and Voyageur, which followed the collapse of the Terra ecosystem amidst a general decline in risk assets in the wake of money supply tightening starting earlier this year.

Now it turns out, ringing as strangely familiar, BlockFi is supposedly talking to Binance about financial assistance.

Fear of further fallout is palpable. Dust hasn't settled. Rumblings and rumors continue to surround the treasury management of Tether (USDT), the world’s largest stablecoin. Steadfast in its reassurances, USDT has been able to maintain, for the most part, its dollar peg. The nerve-tingling $0.997 level was tested again late last night, just as it has been in recent days.

Silvergate Capital, a crypto-focused bank, saw its shares (NYSE:SI) tumble yesterday as investors digested the bank's assertion on Friday that there was nothing to see, certainly not a bank run, as FTX's deposits represented less than 10% of its $11.9 billion in total digital deposits (CoinDesk).

Unfortunate exhibits of the far-reaching implications of the FTX collapse keep creeping up – a Hong Kong trading platform burned for $13 million, a hedge fund lamenting losses of up to $50 million, some Nigerian startup stung for an undisclosed amount – concerning, for sure; and yet not exactly the hardest-core evidence that pieces of the sky are actually falling.

FTX’s collapse will likely lead to an extended crypto winter with subpar liquidity levels stunting markets until at least the end of the year, possibly well into 2023, Coinbase said.

No, it'll be a few years, said Binance CEO Changpeng “CZ” Zhao, summarizing the seismic setback of the FTX debacle.

Both wrong, adds Tim Draper, famous venture capitalist. "Still $250,000 by early next year," Draper said of Bitcoin's price, sticking by a forecast he originally made in 2018.

“FTX was centralized, reliant on a single founder,” he told Cointelegraph. “When a currency is centralized, a central bank for instance, it has a single point of failure, and can also be manipulated,” he added.

According to Draper, an early backer of Coinbase and Ledger, the demise of FTX would spark even more decentralization.

Draper told MarketWatch that he never viewed SBF as the golden boy of crypto and also that he has been broadly skeptical of platforms that don't offer clear transparency regarding their holdings. He also emphasized how he felt bad for "those who got caught up in this mess."

FTX is not a case of nefarious actors acting nefariously, Draper insisted. "This is about people who got ahead of their skis."