Special Report: The FTX Contagion Spreads

The crypto markets entered a second week suffering the aftermath of the FTX debacle that plunged the industry’s market cap by 23%. As of Monday’s close, Bitcoin and Ethereum fell by almost 6% and 11%, respectively. Within the major subcategories, the cryptoassets most affected by the FTX’s bank run this week were Solana, Polygon, and Uniswap, which dipped by 17%, 15%, and 17%, respectively.

Figure 1: Weekly TVL and Price Performance of Major Crypto Categories

Source: 21Shares, Coingecko, DeFi Llama

Key takeaways

• FTX’s bankruptcy drags BlockFi and Gemini with it.

• 75% of last week’s inflows were invested in short products.

• It’s becoming increasingly more expensive to mine Bitcoin.

• The crypto industry to have an Emergency Fund similar to that of the IMF.

Spot and Derivatives Markets

Figure 2: Weekly cryptoasset flows (US$m)

Source: Bloomberg, CoinShares

As seen in the figure above, last week saw inflows to digital asset investment products amounting to $44M, 75% of which are invested in short products, painting a vivid picture of the negative market sentiment on the back of the collapse of FTX and the repercussions that followed.

On-chain Indicators

Figure 3: BTC Average Mining Cost

Source: MacroMicro

The average cost of mining Bitcoin has increased by more than 15%, to exceed the $22K mark, and has now become higher than the spot value of the cryptoasset. This, coupled with the ongoing energy crisis, can forecast the shutdown of many nodes that can neither cover costs nor afford a sharp decline in revenue.

Next Week’s Calendar

Read our full report here

Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

Disclaimer

The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.