What happened

Shares of several notable cryptocurrencies continued to decline today, as investors digest the fallout from the FTX debacle, which has roiled the crypto market.

Over the last 24 hours, the world's second-largest cryptocurrency, Ethereum (ETH 2.64%), traded roughly 4% lower as of 12:01 p.m. ET.  Meanwhile, the price of Solana (SOL 1.69%) traded down 3.7%, while the meme token Dogecoin (DOGE 1.69%) was down 2.7%.

So what

FTX, one of the world's largest crypto exchanges, filed for bankruptcy last week after rumors of solvency issues led to a liquidity crunch that drained the exchange of as much as $6 billion in just 72 hours.

Person drawing red squiggly line downward.

Image source: Getty Images.

While it looked like at one point FTX's rival Binance would step in and buy the company, Binance walked away from the deal less than a day later. It then came to light that FTX founder Sam Bankman-Fried had lent customer funds from FTX to its sister trading company, Alameda Research, which Bankman-Fried also owned.

Not only has the fallout shaken investors' confidence in the industry, but the FTX bankruptcy is spreading to other crypto firms that are now dealing with issues of their own.

"The drama around FTX upset what was otherwise an emerging positive setup for crypto as the significant deleveraging in May and June 2022 had left few if any large marginal sellers in this space," Coinbase Global analysts David Duong and Brian Cubellis wrote in a recent research note. "But the recent market turbulence and absence of large buyers have left the asset class vulnerable, potentially extending an already long crypto winter."

Ethereum and Solana are dealing with problems of their own in regard to FTX. While FTX was melting down last week, a hacker apparently gained access to the network and stole about $663 million of crypto assets from the exchange.

That included almost $289 million of Ethereum, making the hacker now the 35th-largest Ethereum holder. So, if the hacker goes to sell all of that, it could flood supply and lead to a further drop in the price of Ethereum.

Solana has taken a bigger hit than most cryptocurrencies due to its deep ties to FTX and Alameda, which purchased more than $700 million worth of Solana, although apparently much of that is locked up and cannot be sold until 2028. The token is down more than 63% since Nov. 5.

Now what

The Federal Reserve's interest rate hikes have dogged crypto all year. But after the Fed indicated earlier this month that it might soon pivot to smaller interest rate hikes, it looked like the sector might be ready to leave the crypto winter behind.

Now, the FTX debacle has shaken confidence in crypto and investors will likely continue to see the fallout reverberate throughout the industry for some time.

Given how volatile the market is right now, I am really only interested in the two largest cryptocurrencies, Bitcoin and Ethereum. I do think those will ultimately survive and have value going forward. Many others like Solana do have potential but I don't see the risk being worth it right now.