The world's second-largest crypto exchange is facing a major issue that could have widespread implications for the entire cryptocurrency market. In our case study, we examine the true events surrounding FTX, whether its management could have averted the crisis, and the subsequent effects on the industry.
A brief overview of FTX:
FTX, a digital currency exchange, is headquartered in The Bahamas.
The exchange's largest offices are in Chicago and Miami, and it operates under US administration.
Founded in 2019, FTX reached its peak in 2021 with over a million users.
Sam B., also known as the "Crypto King," is the founder and former CEO of the exchange and owner of the Alameda hedge fund.
FTT, FTX's native token, appears to be the primary cause of the issue.
Binance, the largest cryptocurrency exchange, announced shortly after the news broke that it would dispose of its FTT holdings, worth approximately $500 million, "in response to recent revelations." FTT's value plummeted, prompting FTX users to withdraw their funds.
FTX struggled to complete nearly $6 billion in withdrawals within a three-day span, resulting in a liquidity crisis that prevented them from fulfilling customer requests.
Bankman, the former CEO, admitted to the liquidity shortfall and acknowledged that FTX lacked the means to meet customer demands, citing "poor corporate governance" for the misjudgment of leverage and liquidity. He resigned and filed for bankruptcy.
Hours after announcing bankruptcy, FTX reported being a victim of "unauthorized transactions." Analysts speculate that the alleged breach may have led to the theft of $477 million from FTX.
The original source of this article is: blog.alphaguilty
Currently, FTX is unable to process withdrawals and strongly advises against making deposits. The future of the exchange is in serious jeopardy, and customer trust has been significantly undermined, heightening concerns over investment security and liquidity. The FTX debacle represents the largest collapse in the short history of cryptocurrencies.
The broader market has already felt the repercussions of this collapse, with Bitcoin falling from $20,000 to $16,500 – its lowest point since 2020. Additionally, numerous other coins have also suffered losses due to the ongoing cryptocurrency crash.
While FTX is not the first crypto exchange to collapse, it is arguably the most prominent and trusted platform to experience such a devastating failure. Though it is expected that traders and investors will proceed with increased caution, they are unlikely to abandon cryptocurrencies entirely.