After the collapses of Celsius, Terra, 3AC, BlockFi, and others, many had believed that all of the excess leverage in the system had been washed out, and the system had been cleansed of irresponsible decision makers. The contagion is spreading out to other companies, and time will tell exactly how bad the situation ends up – one thing is for sure, the bear market is going to be extended.

The collapse of FTX sparks contagion

However, this was evidently not the case, as it has now transpired that FTX is yet another company that has now gone completely insolvent.

Speculation over how large the hole in their balance sheet was ranged from $2 billion to $6 billion, but it has now emerged that the total tally is $9.4 billion.

Sequoia Capital has huge loans to FTX

There are many companies that lent money to FTX and that FTX lent money to, which are now likely to be completely underwater.

FTX was one of the largest market makers in the entire crypto space, and the fact that it has transpired that they ran their operations in an extremely degenerate manner with an extremely high risk tolerance has caused a lot of problems for the industry.

One of these firms was Sequioa Capital, which was extremely impressed by SBF’s knowledge on crypto and his vision for how crypto could make the world a brighter place in the coming years.

At first, they admit that they were surprised to hear that FTX wanted to raise funds given that they were already so well-capitalised, but they believed SBF’s trope that they needed more capital to distinguish themselves from the rest of the crowd.

Many DAO treasuries will now be secretly underwater

It won’t be easy at first to know what the full scale of the contagion is, given that many parties won’t be publicly disclosing their losses until there is more information and clarification about the situation.

To an outsider it may seem completely obvious that those with deposits are likely to be able to retrieve just pennies on the dollar, but those who have lost funds may at first be unwilling to accept it.

Novogratz once again takes a hit

After reading a completely fictitious tweet about how El Salvador’s treasury was stored on FTX, Novogratz then went onto CNBC to repeat the claim in order to explain how lots of large players were underwater.

It wasn’t even remotely true, but the rumour subsequently spread like wildfire nevertheless.

Unfortunately for Novogratz, it seems that only two weeks after laying off 20% of their workforce for the bear market, Galaxy Digitial did have exposure to FTX, to the tune of $76.8m.

He hasn’t had a good year, having inked a tattoo of a wolf howling at the moon with the caption “$LUNA” just before the markets completely collapsed.

It remains to be seen how much worse the contagion will be, but as the above tweet demonstrates, there already hundreds of companies that have been forced to declare bankruptcy in the past few days.

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