- FTX is one of the world’s largest crypto exchanges and collapses as a result of mishaps.
- The collapse has shocked crypto enthusiasts and investors and marked a downturn in the whole crypto market.
The crypto market is both profoundly unstable and unpredictable at the same time. This makes it difficult for speculators to contribute or make a correct forecast. Even if they make a prediction by doing technical or fundamental analysis, the market suddenly comes up with news that affects the whole market.
Such news, which has depressed the whole crypto market, is the news of FTX’s Collapse. FTX- which is short for Futures Exchange, is the world’s largest crypto exchange and deals with over 300 trading pairs, including Bitcoin, Ethereum, and many more. The exchange filed for bankruptcy on November 11, 2022, as a result of various mishaps.
FTX (Futures Exchange)
FTX is one of the world’s largest crypto exchanges and was co-founded by Sam Bankman Fried, known as the golden boy in the crypto space. What sets it apart from other trades is that it centers on exchanging crypto subsidiaries. The company works in a few nations, counting the U.S., Bahamas, Japan, Europe, Switzerland, and Hong Kong.
The platform has its own native cryptocurrency called FTT. The collapse has resulted in the price of the stock falling from $85 to $2. The trading firm has seen significant growth in the crypto space since its launch in 2019.
FTX’s valuation peaked at $32 Billion in January 2022 due to their raising of $400 Million from investors, including Softbank. The problem started when the balance sheet of its affiliate trading firm, Alameda Research, was leaked on the internet, showing potential leverage and solvency concerns.
The whole downturn is a result of a sequence of events that triggered the collapse of the crypto exchange within a period of 10 days.
What Actually Happened In The FTX Collapse?
As earlier stated, the collapse is the result of a sequence of events. This event started in early November when the balance sheet of Alameda Research, a quantitative trading firm, leaked, showing the potential leverage and solvency of the company. This firm is also run by Sam Bankman-Fried.
Following these reports, its rival crypto exchange has also decided to withdraw all 23 Million FTT tokens valued at $529 Million. The event triggered the confidence of the crypto investors that the firm is facing serious mismanagement. There are also allegations that the firm is misusing customer funds.
These events resulted in FTX’s official collapse on November 17, 2022, when it filed for bankruptcy with its 101 debtors. Customers started to withdraw their stakes in the firm before it filed for bankruptcy. Besides these, there are allegations that it would take $8 Billion to refund the customers.
Effects Of FTX Collapse On Crypto Market
The collapse has shocked crypto insiders and led to shock waves throughout the crypto industry. It had resulted in another period of volatility in the highly speculative digital asset market. The price of its native token, was down from $85 to $2, as was the case with other digital currencies.
What To Learn From FTX Collapse
The FTX collapse is a result of mismanagement and mistrust, which have triggered the downfall of the crypto exchange. Mr. Ray, the bankruptcy specialist, said that the whole company was a mess. All through my whole career, I have never seen such a noteworthy breakdown of corporate controls, he said.
This implies that the complete crypto advertise changes a parcel and it’s difficult to anticipate what will come another. The collapse has moreover made decentralized fund well known since it does not require any central gather to control it. Well, it’s interesting to know what the implications of this collapse will be in the future.