The FTX cryptocurrency exchange debacle has shocked the entire cryptocurrency industry. It is still early to determine the full damage.
Industry sources agree that it will take many years to restore public confidence in the crypto industry.
This crisis of confidence is also coupled with a liquidity crisis impacting many firms. This is because FTX and its founder Sam Bankman-Fried had become the saviors of companies weakened by the credit crunch, caused by the collapse of sister cryptocurrencies Luna and UST, or TerraUSD, last May.
The brokerage Genesis, for example, suspended withdrawals due to its exposure to FTX, which also affects its partner Gemini, the exchange founded by the millionaire twin brothers Tyler and Cameron Winklevoss.
Crypto lender BlockFi is set to announce its bankruptcy filing imminently, news reports claim. Other firms could follow.
The FTX collapse has affected almost every crypto investor, even without exposure to FTX, as it has caused cryptocurrency prices to plummet.
Bieber's NFT Lost 94.5% of Its Value
Within a few days, the ramifications of the implosion of FTX, which filed for Chapter 11 bankruptcy on November 11, spread to sports and entertainment. NFL star Tom Brady, NBA star Steph Curry and "Seinfeld" creator Larry David are among the long list of celebrities being sued in a class action lawsuit against FTX, filed in Florida.
What is glossed over is the fact that the FTX scandal is affecting a crypto asset class that was still very much in vogue until recently. These are non-fungible tokens or NFTs, which are unique, non-editable digital tokens that are part of a blockchain and can be associated with any form of digital asset such as a JPEG or a GIF. Their purchase provides the token that states the ownership of the original digital file.
This segment of the cryptocurrency market is dominated by stars, celebrities and influencers. They just burned their fingers.
The floor price of the Bored Ape Yacht Club, an NFT collection of 10,000 simian avatars created by Yuga Labs, is currently 58.18 ETH (ether), the second largest cryptocurrency, according to NFTPriceFloor.com. In dollar terms, the floor price, which is the lowest price that someone can buy a Bored Ape, is $70,233. This price is down 83.6% compared to its peak reached last April at $429,000, or 152 ETH.
This drop in value affected singer Justin Bieber in particular, who acquired Bored Ape Yacht Club #3001 last January for 500 ETH, which amounted to $1.3 million at the time. The price of this Ape is currently at 59.16 ETH, which amounts to $71,420 based on the current price of ether. Bieber's Ape has lost over $1.2 million of its value in less than a year, or 94.5%.
"What if you had it all, but nobody to call, maybe then you’d know me. Cuz I’ve had everything but no ones listening and that’s just f***in lonely. #lonelyboredape," Bieber wrote on Instagram, using lyrics of his song "Lonely," to introduce his Ape.
Coachella NFTs Are Trapped on FTX
The pop star isn't the only one to be impacted, as celebrities like Jimmy Fallon, Snoop Dogg, Gwyneth Paltrow, Paris Hilton, Eminem and Madonna have also taken part in the Bored Ape frenzy.
The situation of the Coachella music festival is worse. Its entire collectible NFTs on the cryptocurrency platform, developed in partnership with FTX, sold for $1.5 million last February, including 10 lifetime VIP passes, has now been blocked since the firm filed for bankruptcy. Users and owners of these NFTs no longer have access to them. It is not certain that they will recover them when the assets of FTX are liquidated.
"We are confident we’ll be able to protect the interests of Coachella’s NFT holders," the festival said.
An earlier version of this story reported that Michael Jordan was affected by the FTX collapse. “To clarify and correct the record, Michael Jordan has no ownership in or position with the 6 Rings NFT collection created by HEIR and neither HEIR nor its projects are affiliated with or endorsed by Michael Jordan,” a spokesperson for Jordan told TheStreet.
