Why did the FTX crash change the entire cryptocurrency market?
The FTX event is arguably the most significant this year for the cryptocurrency industry. If the fall of Terra Luna last May was already a significant fact for this market, which is going through a difficult year, the bankruptcy of the third largest platform in the world is something that seemed impossible until recently.
But the reality is there. FTX no longer exists, or at least the company has filed for bankruptcy, and even though its recovery will occur in the coming months, many of the investors whose funds are currently inaccessible on this platform have little chance of fully recovering them.
It all started in early November with an article on Coindesk that revealed part of Alameda Research's accounting, suggesting that the parent company of FTX may be dependent on the FTX platform 's FTT token.
This simply means that this investment fund could collapse depending on the price of the TLT and therefore indirectly FTX, the third largest trading platform in the world, was also exposed to its own token proving its potential default.
Following this information, Binance said it would sell the TLTROs it owned in the coming months. As a result, many investors started withdrawing their funds from FTX and within hours, FTX lost over 80% of its value.
Sam Bankman-Fried alias SBF, the CEO and founder of FTX asked Binance for help by speaking with Changpeng Zhao alias CZ. While Binance has mooted the possibility of acquiring FTX, that hope was short-lived as within hours of the announcement, CZ announced that Binance was withdrawing from the takeover offer.
As a result, the ITF continued to fall from its initial $25 to below $2. Meanwhile, withdrawals were now impossible on FTX and many investors could not recover their assets.
A few days later, SBF resigned and John Ray assumed the position of CEO of FTX, while declaring that FTX had filed for bankruptcy. As if that weren't enough, the exchange platform suffered a potential "hack" that caused it to lose millions of dollars over the weekend of November 12th.
However, it has emerged that it was the regulators in the Bahamas, where FTX is headquartered, that requested the transfer of all funds to one of the country's regulators accounts to protect investors, who on Quantum AI have never encountered these problems.
As a result, FTX is in a shambles and unlikely to recover, as it has a hole of more than $4 billion as SBF used investor funds to try to offset Alameda Research's losses.
The situation remains extremely complex because the bankruptcy filed under US jurisdiction clashes with the procedures established by the Bahamas. A real legal battle is therefore expected to establish who should first regulate this platform and its state of bankruptcy. In the end, the big losers in this story are once again the investors.
Consequences for the cryptocurrency industry and market
The first repercussion of the fall of FTX is that the entire market is feeling the effects. While the bear market appeared to be easing, such an event obviously intensified this effect.
As a result, Bitcoin (BTC) temporarily dipped below $16,000 before stabilizing around $16,700. It is the first time in two years that the value of BTC is so low.
So when Bitcoin goes down, it has a similar effect on the entire market, which remains dependent on the cryptocurrency. As a result, many cryptocurrencies have lost value, while some projects looked set to explode.
Also, many exchange platforms and projects are in trouble due to the fall of FTX. The first to come to mind is Gemini, which had funds on FTX, or the Solana blockchain, which depended on the FTX ecosystem.
In short, this event changed the entire market and it may take some time to recover. This event is unprecedented, but it could be difficult for the market to experience a strong rally in the coming weeks. The situation will need to stabilize before we can hope to exit the bear market
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The article Why Did the FTX Crash Change the Entire Cryptocurrency Market? comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/perche-il-crollo-di-ftx-ha-cambiato-lintero-mercato-delle-criptovalute/ on Mon, 28 Nov 2022 18:13:49 +0000.