New failure in the world of cryptocurrencies. This time it is digital asset lending and trading platform BlockFi that has filed for insolvency. The company last week blocked withdrawals from its platform, the culmination of a crisis that began last spring and was accelerated by the FTX crash.
The relationship between Ftx and BlockFi
The two cases are closely related. Sam Bankman-Fried’s company had issued a credit of 400 million dollars against BlockFi. BlockFi CEO Zac Prince said on that occasion that the funding “will provide access to the capital needed to further strengthen our balance sheet.” The opposite has happened.
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The deal also included an option for FTX to purchase BlockFi. Which could not be verified due to the failure of the first one. In fact, after the collapse of Ftx, BlockFi suspended operations due to a “significant exposure” to Ftx. In documents sent to the New Jersey court, BlockFi said it has approximately 100,000 creditors, customers who had bought and deposited digital assets such as Bitcoin in the company.
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100 thousand creditors. 5 billion valuation in the US
Last year it had reached a valuation of 5 billion dollars after having raised 1.4 billion in investments from American venture capital.
A week ago, BlockFi declared on its blog that it had “significant exposure” to FTX and Alameda, a hedge fund linked to the cryptocurrency exchange.
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“There are several scenarios available to us and we are working to determine the best path forward,” the company wrote at the time. Before having to give in to the evidence, and admit the state of insolvency.
Reaction bitcoin accelerates losses and approaches the lows for two weeks, just above $16,000. Ethereum drops 0.6% to $1,100. While the entire crypto sector drops 3.7% with 814 billion in capitalization.