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Bitcoin price falls to more than two-year low amid growing concerns about FTX fallout

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Bitcoin fell to more than a two-year low in Tuesday morning 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 US$15,776 at 8 a.m. in Hong Kong, a drop of 3.4% 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$1,111. 

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 holds 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 that are spreading to other businesses.

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, which lists seven main subsidiaries on its website, including Genesis and digital asset manager Grayscale, which oversees $28 billion worth of Bitcoin, Ether and other assets.

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, rising 1.4% to US$0.36 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 downturn in the crypto market is also denting 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.

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