First Mover Asia: Crypto Exchange BitMEX Publishes Proof of Reserves Ahead of Friday’s BMEX Listing; Bitcoin Rebounds After Dropping Below $16K

Good morning. Here’s what’s happening:

Prices: Bitcoin sank below $16K for the first time in two years before rallying. Ether drops under $1.1K.

Insights: BitMEX holds more bitcoin than what it owes customers, its proof-of-reserves show.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover,our daily newsletter putting the latest moves in crypto markets in context.

Prices

CoinDesk Market Index (CMI) 813.72 −101.0 ▼ 11.0% Bitcoin (BTC) $16,215 −1984.2 ▼ 10.9% Ethereum (ETH) $1,144 −163.3 ▼ 12.5% S&P 500 daily close 3,748.57 −79.5 ▼ 2.1% Gold $1,711 +0.9 ▲ 0.1% Treasury Yield 10 Years 4.15% ▲ 0.0 BTC/ETH prices per CoinDesk Indices; gold is COMEX spot price. Prices as of about 4 p.m. ET

Bitcoin Rallies, but Still Lumbers Near Two-Month Lows

by James Rubin

A sad Wednesday for cryptocurrencies seemed to get sadder by the minute before bitcoin and a number of leading altcoins by market capitalization staged a small rally.

As Asian markets opened, BTC was trading at about $16,200, down nearly 11% over the previous 24 hours, but a marked improvement from earlier in the day when it seemed headed toward $15,000. The decline continued bitcoin's downward trend this week following the rapid unraveling of crypto exchange giant FTX, which suffered a liquidity crisis and was then jilted by would-be rescuer Binance.

Ether followed a similar pattern, tumbling below $1,100 for the first time since mid-summer before regaining a small swathe of lost ground. The second-largest crypto in market value was recently changing hands at about $1,140, off more than 12% from Tuesday, same time. ETH had been hovering over $1,500 for the past two weeks.

Other major cryptocurrencies continued to plunge for a third consecutive day as investors fretted over every development in an industry already rocked by calamities involving crypto giants Terraform Labs, Three Arrows Capital and Celsius Network.

FTX’s FTT token recently dropped almost 55% a day after plummeting about 80% and was trading at just $2.34. The Solana platform’s SOL token recently fell almost 40% to continue its downward momentum of recent days. Last week, CoinDesk reported that a copy of FTX sister company Alameda's balance sheet showed the firm held $292 million of “unlocked SOL,” $863 million of “locked SOL” and $41 million of “SOL collateral.” Even Binance’s BNB token was down about 15% after outperforming most other cryptos on Tuesday.

The CoinDesk Market Index, a broad-based index designed to measure the market capitalization weighted performance of the digital asset market, was down 3%.

A day after U.S. midterm elections, stocks saw their first red of the week, with the tech-heavy Nasdaq and S&P 500 dropping 2.4% and 2%, respectively. The Dow Jones Industrial Average (DJIA) was off 1.9%. Safe haven gold ticked down slightly.

In an email, Edward Moya, senior market analyst for foreign exchange market maker Oanda, wrote that the FTX debacle and its much-admired CEO, Sam Bankman-Fried, has shaken an industry often criticized for its lack of guardrails.

“Sam Bankman-Fried was supposed to be bulletproof,” Moya wrote. “SBF was crypto’s ‘white knight’ and the implosion of FTX means no one is safe. The stabilization period for crypto is over and now we wait to see if other contagion risks emerge.”

Moya added: "Cryptos are under intense pressure as contagion risks remain elevated from the FTX liquidity crisis. No one wants to touch anything that has ties with FTX and that is troubling news."

Biggest Gainers

There are no gainers in CoinDesk 20 today.

Biggest Losers

Asset Ticker Returns DACS Sector Solana SOL −39.0% Smart Contract Platform Cosmos ATOM −15.4% Smart Contract Platform Decentraland MANA −14.9% Entertainment

Insights

Crypto Exchange BitMEX Publishes Proof of Reserves Ahead of Friday’s BMEX Listing

By Shaurya Malwa

Crypto exchange BitMEX was among the first players to publish updated proof-of-reserves of their crypto holdings as fear gripped markets amid FTX’s liquidity crisis.

Crypto exchanges are now scrambling to publicly publish their fund reserves. On Wednesday alone, nine exchanges – Binance, Gate.io, KuCoin, Poloniex, Bitget, Huobi, OKX, Deribit and Bybit – separately issued statements that they would publish their Merkle tree reserve certificates to increase transparency.

Publishing proofs can take one month, but OKX Director of Finan to publish results, BitMEX opted for a simpler way: “All BitMEX has done here is publish a basic list of the reserves. The list contains all the bitcoin we have under our custody on behalf of our clients, it is as simple as that,” the exchange said in a Wednesday post.

While most exchanges said they would use Merkle tree processing to publish results, BitMEX opted fora simpler way: “All BitMEX has done here is publish a basic list of the reserves. The list contains all the Bitcoin we have under our custody on behalf of our clients, it is as simple as that,” the exchange said in a Wednesday post. (The list of BitMEX’s custodied assets is available here.)

The list contains the execution scripts for each user transaction under custody, which in turn include BitMEX public keys. “This, therefore, proves that the company is able to access all the funds, assuming the company has access to the private keys associated with the public keys,” BitMEX said.

At one point on Nov. 8, BitMEX held a reserve bitcoin balance of 75,742.4 BTC against liabilities of 75,617.1 BTC, meaning it holds assets in excess of what it owes to customers.

The proof-of-reserves preceded Friday’s initial listing of BMEX tokens, BitMEX’s native token. The exchange initially announced the token in 2021, as CoinDesk reported, before airdropping BMEX to users based on their activity. The tokens were supposed to be offered for trading in July, but those plans were dropped amid faltering “market conditions.”

For some crypto market observers, the decision by BitMEX, which has historically focused on derivative trading, was a means for the exchange to remain relevant.

“BitMEX ‘degens’ and the ‘trollbox’ were mainstays of the Wild West world of crypto trading before newer exchanges launched and gained relevance after 2017,“ said Tim Behrsin, founder of crypto project Grexie, in a Telegram chat.

“BitMEX issuing tokens is how the exchange remains relevant among new crypto traders spoilt by choice by rival exchanges that offer interest-accruing exchange tokens and discounts based on tokens held.

Important events

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9:30 p.m. HKT/SGT(13:30 UTC) United States Initial Jobless Claims (Nov 4)

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Crypto Markets Tumble as FTX Reportedly Hit With $6B in Withdrawals

Fears over FTX's solvency led to massive withdrawals from the cryptocurrency exchange, an offer from rival Binance to purchase the company, and ripple effects throughout the crypto markets. CoinDesk's Tracy Wang has the latest details in this developing story. Rep. Jim Himes (D-Conn.), Kristin Smith of the Blockchain Association and Sylvia Jablonski of Defiance ETFs also joined "First Mover" to discuss the unfolding drama.

Headlines

Alameda Research, FTX Ventures Websites Go Dark:The websites were either taken down or made private only a day after news broke that Binance had signed a letter of intent to purchase its cash-strapped rival exchange.

Crypto Stocks Continue Drop as Binance Walks Away from FTX Deal:Concerns around FTX's health along with the broader crypto ecosystem spilled into the stock market Wednesday.

With FTX Bloodied, Rival in US Regulatory Fight Adds Another Knife:One of the traditional, regulated firms that has opposed an FTX effort to upend derivatives clearing – Cboe Digital – jumped into the drama by issuing a letter boasting about its safety measures.

Alameda, In Eye of Crypto Storm, Takes $37M of Wrapped Bitcoin Off FTX.US Exchange:The purpose of the token movements is unclear, and the amount likely a small portion of the overall firm's holdings, but the observation shows Alameda scrambling to arrange its finances – using the Ethereum blockchain.

A Failed FTX-Binance Deal Is ‘Catastrophic’ for Crypto Sector:Binance scrapping its acquisition of rival FTX could mean institutional investors deciding to pull funds out of the crypto industry.

Most of FTX's Legal and Compliance Team Quit, Report: Semafor, a news organization in which FTX's Sam Bankman-Fried invested, cites people familiar with the matter.

Bitcoin Hits 2-Year Low Below $16K After Binance Backs Out of FTX Deal: Bitcoin's price fell as low as $15,625 Wednesday. It was the first time the largest cryptocurrency has fallen below $16,000 since November 2020. The BTC price was down 14% on the day, the biggest plunge in almost five months.