‘Mass Panic’ Triggers $1 Trillion Crypto Price Crash And ‘Short Squeeze’ Warning As FTX’s FTT Goes Into Freefall—Dragging Down Bitcoin, Ethereum, BNB, XRP, Solana, Cardano And Dogecoin

Bitcoin, ethereum and other major cryptocurrencies have plunged this week, wiping billions of dollars from the combined crypto market and sending it under the closely-watched $1 trillion mark.

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The bitcoin price has crashed under $20,000 per bitcoin, down 6% over the last 24 hours, while the price of ethereum and other top ten cryptocurrencies BNB
BNB
, XRP
XRP
, cardano, solana and dogecoin have each lost between 3% and 15%.

Now, crypto exchange FTX, led by billionaire Sam Bankman-Fried, has stopped processing withdrawals, according to reports—sparking “mass panic” and sending FTX’s FTT down 30% after a rival exchange chief executive issued a stark warning.

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“Mass panic around FTX’s solvency has caused investors to withdraw their assets from the platform hastily, which FTX have clearly struggled to deal with,” Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, wrote in an emailed note.

The Block has reported FTX stopped processing withdrawal requests at around 6am ET, citing ethereum blockchain data. FTX did not immediately return a request for comment.

Over the weekend, Binance chief executive Changpeng “CZ” Zhao sent shockwaves through the bitcoin and crypto community when he announced Binance was liquidating its holdings of FTX’s cryptocurrency FTT, a rival to Binance’s own much larger BNB, citing “recent revelations” about FTX and Bankman-Fried’s trading company Alameda Research. Last week, Coindesk reported Alameda Research’s balance sheet is loaded with FTX’s FTT, making it highly illiquid.

“Whether this is just short-term liquidity issues due to the speed of withdrawals, or a more fundamental issue, is yet to be seen,” Sotiriou added. “However, the silence from FTX CEO Sam Bankman-Fried is deafening, and causing further fear. FTX’s token FTT is down 30% at $15 at time of writing, but an announcement from FTX could result in a short squeeze”—where bets against an asset fail and result in a sudden price surge.

Yesterday, Bankman-Fried posted to Twitter that “FTX is fine. Assets are fine.”

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The drama between FTX and Binance have worried the bitcoin and crypto community who fear the clash will spillover to the wider market, as the collapse of hedge fund Three Arrows Capital did earlier this year in the aftermath other terra luna meltdown.

“Fears of contagion from the public spat between Binance and FTX have gripped the cryptocurrency market, resulting in an aggressive sell-off in FTX’s token, FTT, as well as solana
SOL
, which is one of the largest holdings of FTX’s principal trading firm Alameda Research,” crypto market analysts at the exchange Bitfinex wrote in an emailed comment.

“FTX and Alameda both scrambled to calm fears of another Three Arrows event after Binance chief CZ announced he would liquidate his FTT position. This continues to unnerve traders in a space so driven by sentiment.”

Solana, an ethereum rival that rocketed higher last year, has seen an outsized crash this week due to FTX’s large solana holdings that some think the exchange may be forced to sell-off.

“Solana’s SOL token is currently taking one of the biggest hits because FTX is a big supporter of the layer one blockchain and holds significant amount of SOL on its balance sheet that it may have to sell to shore itself up in the current bank run,” Marius Ciubotariu, a core contributor to solana-based Hubble Protocol and Kamino Finance, said via email. “If that happens, that could be bad news for the SOL token and possibly the industry at large.”