The fallout from the FTX implosion continues this week as yet another crypto lender falls… 

This past Monday, the lender BlockFi Inc. filed for chapter 11, highlighting the ‘contagion’ effects that the fraud-laced failure of the world’s largest crypto exchange, FTX, has unleashed.

It seems like this sort of thing has become commonplace in the largely unregulated crypto space. 

BlockFi is pinning the bankruptcy blame on both the declining crypto prices from this summer and the recent devastating failure of FTX. 

A big reason why the failure made its way to BlockFi was thanks to the FTX-affiliated trading firm, Alameda Research. 

Disclosed in BlockFi’s court papers was Alameda’s inability to pay the $680 million that was owed to BlockFi.

And it doesn’t stop there, further disclosures in BlockFi’s court papers show that it owes its top 10 creditors a combined $1.2 billion… with its total liabilities to customers coming in at a far larger figure. 

BlockFi’s hope here is that chapter 11 will allow the firm to fulfill its obligations to creditors and recover what it can from FTX and its affiliates. 

However, recovering any money from FTX is a long-term goal given that the extent of FTX’s fallout is still being determined. 

How Far Does This Reach? 

Right now, the term contagion is being thrown around a lot… 

It has to do with the FTX implosion, implying that crypto firms will continue to fall like dominos as this situation spreads. 

Separate from BlockFi, another crypto firm, Genesis Global Capital announced that its lending unit would be suspending withdrawals. 

Genesis stated that the pause comes concerning the “unprecedented market turmoil” that the crypto world is experiencing right now.

Genesis is reportedly seeking emergency funding of up to $500 million so that it can maintain the ability to pay its customers. 

Now, crypto investors around the globe are watching nervously waiting for the next domino to fall. 

What a whirlwind environment it’s been for cryptocurrency, just a few months ago everything seemed peachy… 

Bitcoin was climbing to new highs, NFTs were picking up steam, and all the failing crypto firms were flourishing. 

Then, most of that value melted in just under a year. 

With firm after firm either pausing withdrawals or looking into bankruptcy, the question on many investors' minds: When will the bleeding stop?

With many losing hope for the future of cryptocurrency, it’ll likely take a decent amount of time before the dust settles and the entire industry can recover from these devastating losses. 

While that doesn’t necessarily mean there isn’t money to be made in the crypto space, the extremely volatile and fraud-laden environment is enough to turn away the average, risk-averse investor. 

This also hurts prospects for cryptocurrency to make its way back into the main stage as any sort of legal currency. 

It’s been over a year since El Salvador made history as the first country to accept bitcoin legal tender… 

With all the recent developments, the country has found its crypto experiment to be largely anticlimactic.

Even though bitcoin is accepted as legal tender, adoption is a slow burn, to put it lightly. 

Reports have discovered that only a handful of businesses even accept bitcoin as payment for goods and services, with even fewer citizens looking to pick up bitcoin.

Between the rapid devaluation and volatility associated, it’s unlikely that other countries will be willing to make the same move that El Salvador made history with.

Once all the dust settles, we may be looking at a different story. But for now, I expect it will take a few years for cryptocurrency to get back to the reputation it had at the end of 2021.