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Bitcoin extends gains as investors await recovery fund details

Cryptocurrencies pushed higher on Tuesday as investors awaited more details about an industry recovery fund promised by Binance Holdings Ltd.’s Chief Executive Officer Changpeng ‘CZ’ Zhao.

Bitcoin, the largest token, climbed toward $17 000 with a gain of about 2%, while second-ranked Ether added a similar percentage as of 1:20 p.m. in Hong Kong. The moves provided some respite from a damaging selloff triggered by the descent into bankruptcy of Sam Bankman-Fried’s FTX exchange.

Digital assets linked to his now-fallen empire, such as Solana and Serum, stabilised. So did Cronos, the native coin of Crypto.com, whose platform is under scrutiny for any signs of stress as the sector reels from the FTX wipeout.

Billionaire Zhao, operator of the world’s biggest crypto exchange, announced the plan for the fund Monday and said more details would follow. That helped to stabilize sentiment on speculation the step may stem contagion after a $200 billion drop in the value of digital assets since FTX first began teetering.

Meanwhile, an Elon Musk tweet that Bitcoin “will make it” also salved the mood. Dogecoin, a token the Tesla chief executive officer has touted in the past, edged up for a third day.

While markets have gained on Zhao’s move, such a fund may not be best for the industry, said Quantum Economics Chief Executive Officer Mati Greenspan. Binance already has too much control in a decentralised market, he said.

“That sort of concentration of power makes me uncomfortable,” said Greenspan. “It’s the kind of thing crypto was designed to avoid and one of the lessons we should have learned from last week.”

Some of the first court documents to hit FTX’s bankruptcy docket showed that the collapse may involve more than one million creditors, illustrating the reach of Bankman-Fried’s business before it rapidly unraveled.

Derivatives markets highlight ongoing concerns about the outlook. The Bitcoin futures curve shows the token’s spot price is higher than its futures price — an inversion hinting at bets that the digital asset will resume declines.

Caroline Pham of the US Commodity Futures Trading Commission said the crypto sector suffers from poor risk management.

“It is hard to see where the contagion might stop,” Pham told Bloomberg TV. “More news will come out as people continue to work through their exposures.”

© 2022 Bloomberg




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