Crypto assets are infamous for being highly speculative and volatile, but it is their “debt problems” that have once again made headlines. Since November 2021, the total value of cryptocurrencies has now fallen from a peak of over US$3 trillion (£2.6 trillion) to circa US$830 billion (£706 billion).

This has coincided with a major downturn in global markets due to interest rates going up, but falling prices also reflect a series of collapses and bankruptcies within the industry. These include the Terra Luna blockchain, lender Celsius, the Voyager exchange/brokerage, hedge fund 3AC, and now also FTX/Alameda, which has just filed for bankruptcy.

Crypto assets total value



Note that the graph shows monthly figures – the peak was actually higher on a day to day basis. Trading View

The collapse of FTX, the world’s second largest crypto exchange, concerns a liquidity crisis. This is where a company doesn’t have enough cash or its assets cannot be converted to cash quickly enough to satisfy demand.

In the case of FTX, there had been concerns about the closeness of its relationship with its hedge fund sister company Alameda. These boiled over when rival exchange Binance announced a few days ago that it was sufficiently worried to unload US$500 million of holdings in the FTX native cryptocurrency FTT.