Crypto stocks slide as FTX prepares for bankruptcy proceedings

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FILE PHOTO: Illustration shows representation of cryptocurrency Bitcoin, Ethereum and Dash plunging into water

(Reuters) – Shares of cryptocurrency and blockchain-related firms dropped on Friday after FTX, one of the biggest crypto exchanges, said it would initiate bankruptcy proceedings in the United States, triggering a potentially massive meltdown in the industry.

Silvergate Capital declined 10%, leading the losses in the sector, while bitcoin holder MicroStrategy Inc slipped 2.6%.

Crypto miners Riot Blockchain and Marathon Digital fell about 5% each.

Bitcoin fell 3.6% to $16,919 as FTX Chief Executive Sam Bankman-Fried said he will step down from his position.

“The shock was that this guy was the face of the crypto industry and it turned out that the emperor had no clothes,” said Thomas Hayes, managing member at hedge fund Great Hill Capital LLC in New York.

“And I think that the real risk moving forward is confidence is lost in an asset class.”

The announcement comes days after larger rival Binance walked away from a proposed acquisition of FTX, leaving the distressed firm scrambling to raise about $9.4 billion following a frantic pace of customer withdrawals earlier this week.

The turmoil at FTX, which has rescued other players during the crypto market’s recent crash, has raised concerns about the future of the crypto industry.

Robinhood Markets, which counts Bankman-Fried as an investor, edged 3% higher. The online brokerage said on Thursday it does not have a direct exposure to FTX.

MicroStrategy and Silvergate’s tickers were trending on investors-focused social media platform stocktwits.com, indicating increased chatter among retail pundits.

ProShares Bitcoin Strategy ETF fell 8%, while Short Bitcoin Strategy ETF jumped 7.4%.

(Reporting by Medha Singh and Bansari Mayur Kamdar in Bengaluru; Editing by Shinjini Ganguli)

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