Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Investors spooked by abrupt bank run on FTX
Binance and FTX logos are seen in this illustration taken on Nov. 8. Reuters-Yonhap
By Lee Min-hyung
By Lee Min-hyung
Cryptocurrency investors have been spooked by the ongoing market crash caused by Binance's overnight decision to pull out of a deal to acquire FTX, one of the world's largest crypto exchanges.
The abrupt decision came amid escalating concerns over FTX's liquidity crisis after the company halted all crypto withdrawals.
The market jitters ended up causing price falls of most major and minor cryptocurrencies. According to data from CoinMarketCap, Bitcoin fell to the lowest level in almost two years. As of Thursday 8:30 a.m., Bitcoin prices plunged to $15,700 before slightly recovering to around $16,500 in the afternoon. Ethereum also showed a similar curve, with its value falling to around $1,080 during the same period.
But the price of Solana suffered the biggest drop among mainstream cryptocurrencies. Solana is frequently considered as a strong competitor of Ethereum. Solana was traded between $32.55 and $36.90 on Nov. 6, but the value fell sharply to as low as $13.23 as of Thursday amid the FTX scandal. FTX CEO Sam Bankman-Fried is known as a strong supporter of Solana.
As the sudden crypto meltdown was unexpected, investors here and abroad are in growing panic. Some even argue that the FTX-sparked market crash may end up causing more serious financial damage to investors than the recent debacle surrounding the collapse of the Terra-Luna ecosystem in May.
“Given FTX's once-powerful market influence, reports of the firm's possible bankruptcy come as a serious shock to market participants across the globe,” an industry official said. “Many crypto investors have long waited for the market's rebound at a time when the U.S. Fed nears the end of its rate hike cycle, but the FTX collapse may delay the timeline for a crypto rebound.”
Global financial markets also reacted to the FTX fallout. The Nasdaq ended with a loss of 2.48 percent on Wednesday. Other key indices also lost ground amid weakened investor confidence. The S&P500 finished with a loss of 2.08 percent on the same day.
Korean stocks were also affected by the overnight fall on Wall Street. The benchmark KOSPI started with a loss of 0.77 percent on Thursday amid growing woes on the global financial market triggered by the bearish crypto sentiment. The main bourse closed at 2,402.23, down 0.91 percent from the previous session. The secondary Kosdaq also ended with a bigger fall of 0.95 percent.
The Korean won also lost ground against the dollar amid growing preference for safer assets. Starting this month, the won-dollar exchange rate has been on the decline, but the local currency weakened again on Thursday amid escalating asset market uncertainties. The won-dollar exchange rate ended at 1,377.5 won per dollar, up 12.7 won.