What Happened to FTX? Is Crypto’s Future Doomed?

Can We Save Ourselves From It?

What is FTX?

FTX Exchange was a centralized cryptocurrency exchange. They specialized in derivatives and leveraged goods. FTX, established in 2018 by MIT alumnus and former Jane Street Capital worldwide exchange-traded funds trader Sam Bankman-Fried, provided a variety of trading products. These products included derivatives, options, volatility products, and leveraged tokens. It also offered spot markets in over 300 cryptocurrency trading pairs. Such as:

How did FTX’s Problem Start?

FTX has its own cryptocurrency coin, named FTT, that investors can use to pay transaction fees. Mr. Zhao sold his interest in FTX to Mr. Bankman-Fried last year, who paid for it in part with FTT tokens.

Binance Intervention

Binance said that it had achieved an agreement to buy FTX in order to save it. However, Mr. Zhao stated in the statement that “Binance retains the discretion to withdraw from the arrangement at any time.”

Now What for FTX and Its Investors?

To fulfill the withdrawal requests, FTX must either find billions of dollars or find a way to reassure the safety of their money. When there are so many consumers running for the door, that is never simple. Bloomberg reported on Thursday that Bankman-Fried stated that the firm needs $4 billion to stay stable, with an $8 billion funding deficit.

How Will All This Effect The Crypto Market?

The cryptocurrency industry has been fighting to persuade authorities, investors, and traders that it is safe for a long time. The bankruptcy of FTX, which appeared to be more solid than other businesses, and Binance’s withdrawal has shaken the market. Since the beginning, the price of FTT has dropped by around 80%. Bitcoin and Ether, two of the most valuable tokens, have both decreased dramatically, falling more than 20% at one point.

Is the Future Doomed?

The FTX scandal is now reverberating throughout the cryptocurrency sector. According to CoinMarketCap, it brought the sector’s value down 12% in a single day. This fueled the fears that crypto is set to have its own Lehman Brothers moment.

Can Regulations Fix This Issue?

Cryptocurrency has become massive over the last few years. When it was small in value, it didn’t require any regulation or anyone to follow what was going on. But with billions of people getting in this boat and trading cryptocurrencies, there is a need. This need mainly comes from the fact of how easy it is to launder money and do any kind of illegal activity.

Can Crypto Markets Survive?

Analysts observe that after problematic few months, a lot of dangerous activity is already out of the system. JPMorgan expects Bitcoin might go below $10,000, a level not seen since 2020. In this environment, the “crypto winter” is likely to worsen. Especially as concerns about the broader economic background continue to diminish interest in riskier assets.

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A writer who is passionate about startups and business that focuses on informing people about these subjects. Also publishes on decentfinancelife.com

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Atahan Aslan

A writer who is passionate about startups and business that focuses on informing people about these subjects. Also publishes on decentfinancelife.com