FTX Crypto Exchange Files for Bankruptcy After Week-Long Sell-Off

Cryptocurrencies continued their decline on Friday as FTX announced it has filed for Chapter 11 bankruptcy in the U.S. This news further shook investor confidence in the digital currency market, which has been struggling to recover from recent losses.

Bitcoin and ether prices both fell on Friday, according to Coin Metrics. Bitcoin was down 4% to $16,877.87, while ether lost 3.5% to $1,256.33. For the week, both cryptocurrencies are down 21% and 25%, respectively.

According to a statement posted to FTX's Twitter account Friday, FTX CEO Sam Bankman-Fried has also resigned.

Bankman-Fried has been a champion for the crypto industry, helping to bring it into the mainstream through his relationships with high-profile celebrities, regulators and institutions. His exchange product has also been instrumental in making crypto more accessible to everyday people.

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Investors are keeping a close eye on the fallout from the three-year-old FTX and its sister company, trading firm Alameda Research. It is still unclear how much damage will spread to the rest of the market.

An additional 130 companies have filed for bankruptcy, including Alameda and FTX U.S. This is a significant increase from the previous year, indicating that the global economy is still struggling.

Some of the world's largest financial institutions have invested in FTX, which was valued at $32 billion during its last funding round. These include SoftBank, BlackRock, Tiger Global, Thoma Bravo, Sequoia, and Paradigm.

According to Morgan Stanley analyst Sheena Shah, we are currently experiencing another deleveraging event in the crypto ecosystem. So far, this event has had limited spillover to broader equity markets beyond sentiment. This is because crypto institutions have lent to each other.

"We expect another round of crypto QT," or what the firm has previously described as the "crypto equivalent of quantitative tightening," she added. "These creditors are currently selling crypto assets to cover risks, adding to volatility."