Fears of contagion sweep the crypto sector after the FTX liquidity crisis

Fears of infection spread in the crypto industry, while the market participants are trying to find out who is exposed to Sam Bankman-Fried's secret trading company for digital assets, Alameda Research.

Alameda, an owner, was an inconspicuous part of the entrepreneur's crypto empire, but is at the center of the storm that has devoured his FTX crypto exchange.

The market worries about Alameda's financial health increased, triggered a wave of withdrawals from customers at FTX and urged Banksman-Fried to be saved by the larger rival bony.

When the effects of the shock deal started, the dealer feared that the collapse of Alameda, one of the largest dealers on FTX, could be released by the markets at high speed.

"[Alameda] will strive to liquidate assets in their books in order to meet debt obligations, many of which are available. In addition to the FTX, Alameda is also an active participant in decentralized financing," said Sean Farrell, head of the strategy for digital assets at Fundstrat, a market research provider. "There is enough reason to assume that the risk of further infection remains."

Binance has refused to say whether his takeover plans for FTX include the trading company. A rescue operation could help protect the digital asset industry and the stock exchange customers from further consequences, but would increase the risks of the transaction.

crypto retailers have largely assumed that Binance Alameda will be left to itself and that the dissolution of its positions will add further pain to the market for digital assets that have already faltered from the almost collapse of FTX and a decline in assets by two thirds this year.

"Crypto players react faster to news and rumors, which in turn builds up a liquidity crisis much faster than you would have seen in traditional finance," said Fabian Astic, Head of Decentralized Finance and Digital Wealth at the rating agency Moody’s.

Bitcoin, the largest cryptocurrency, fell 5.4 percent to $ 17,700 on Wednesday, near the lowest level in two years, while Ethereum fell by 9.2 percent. Overnight shares from Coinbase, the crypto exchange, fell by 10.8 percent.

Galaxy Digital, the crypto finance group of the US billionaire Mike Novogratz, announced on Wednesday that they invested almost $ 77 million in cash and digital assets from FTX, of which $ 47.5 million were deducted.

others have hurried to assure the market that they are not exposed to the stock exchange or the FTT, the internal currency for the trade in FTX. Brian Armstrong, Chief Executive from Coinbase, said that his company has "no significant commitment to FTX or FTT (and no commitment in Alameda)".

The most endangered are companies that have awarded Alameda assets and crypto projects in which the retail company has strongly invested, shares that it may now have to sell to compensate for its books.

The company was an important supporter of Solana, a competing blockchain for Bitcoin, which lost up to 50 percent of its value over the dollar overnight on Wednesday before reducing the losses in volatile trade.

"I don't see any situation where [Alameda] comes back. "Alameda should have been able to fix this if they actually had what they said, and this is a clear signal that they don't have it."

JON de Wet, Chief Investment Officer at the crypto asset manager Zerocap, who has acted with Alameda in the past, said that Alameda was recently seen as a solid counterparty for lenders and hedge funds throughout the cryptosector.

"Alameda was a respected company," he said. "I think there will be many companies that would have been exposed to Alameda."

The trading company was founded in 2017 by Bankman-Fried to pursue arbitrage opportunities in different countries and stock exchanges on the resulting crypto asset market and has since expanded its activities.

"Alameda came before FTX. It would take its balance sheet and it would provide liquidity on the exchanges and earn a spread. It would also accept directional bets as a prop trade," said de Wet.

The extent of the pain will depend on whether Binance also supports Alameda. In late Tuesday, an FTX spokesman for the Financial Times said that "Alameda is involved in the deal".

Binance rejected repeated inquiries to clarify his position. His silence will probably increase the views of those on the market who assume that the retail company may fail.