BlockFi Bankruptcy Possibilities Cloud Crypto Market After FTX Storm

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• BlockFi has suspended client withdrawals until further notice.
• SALT has paused deposits and withdrawals for users.
• DefiLlama’s founder reported that lending processes observed a major TVL fall.

DeFi lending protocol BlockFi which offers loans to crypto announced on November 11 that withdrawals are temporarily suspended. The crypto exchange expressed in a tweet that due to a lack of clarity surrounding the FTX situation, BlockFi is currently unable to continue business as usual.

pic.twitter.com/zNF1uP6evl

— BlockFi (@BlockFi) November 11, 2022

Along with pausing client withdrawals, BlockFi also requested clients not to deposit into the BlockFi Wallet or Interest Accounts. The Twitter account mentioned that they will share specifics and updates soon.

On November 14, BlockFi denied that FTX held a significant portion of its assets. However, the lender soon confirmed that it had deposits including undrawn credit on the platform, as well as, debts owned by Sam Bankman-Fried’s FTX. BlockFi further informed users through email that the withdrawals will remain paused.

Bitcoin and crypto-backed loan provider SALT also suspended withdrawals on November 15. “In light of recent events related to FTX,” the announcement cited, FTX’s collapse has affected SALT’s business and until the impact is analyzed, deposits and withdrawals are paused on the platform.

The lending protocol added that while it will recognize on-chain deposits, users are cautioned against depositing additional funds to the account until specifications are communicated.

DefiLlama founder shared on Twitter screenshots of drops in TVL for uncollateralized lending protocols, on November 14. The tweet read,

In some protocols, such as maple, user deposits are locked for months, so ppl can’t withdraw, which explains the smaller TVL drops.

This confirmed suspicion that the FTX meltdown will have inevitable consequences on the DeFi space. He said that the impact will be more prominent for collateral-free lending protocols or uncollateralized lending protocols.

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