The world's biggest cryptocurrency platform Binance on Monday pledged to establish a liquidity fund to curb sector fallout from the collapse of rival FTX, boosting the value of bitcoin.

Cash-strapped FTX filed for bankruptcy on Friday after Binance scrapped a takeover bid, sending chills across the cryptocurrency world.

"To reduce further cascading negative effects of FTX, Binance is forming an industry recovery fund to help projects who are otherwise strong, but in a liquidity crisis," Binance chief executive Changpeng Zhao said on Twitter. He said further details would appear soon.

Bitcoin climbed 2.5 per cent to $16,773 in reaction.

The world's most popular digital currency last week tumbled to a two-year low at $15,574 as speculation grew over the health of FTX.

Bitcoin remains 20 per cent lower compared with November 6, when FTX's troubles began to weigh on markets.

As recently as 10 days ago, FTX was considered the world's second-largest cryptocurrency platform with a valuation of $32 billion.

"FTX held $900 million in liquid assets the day before it went down, compared to $9 billion in liabilities," said SwissQuote analyst Ipek Ozkardeskaya. "This is something that could've never happened in a traditional, regulated financial institute."

FTX is headquartered in the Bahamas, a tax haven with looser regulation than most other jurisdictions.

Police there have said they are investigating the company.

On the same day that FTX filed Chapter 11 bankruptcy proceedings in the United States, its high-profile founder and chief executive Sam Bankman-Fried resigned.

IG analyst Vincent Boy predicted that FTX's failure would "massively erode" confidence in the crypto industry and force regulators to act

IG analyst Vincent Boy predicted that FTX's failure would "massively erode" confidence in the crypto industry and force regulators to act.

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