Why Is Crypto Tanking? Concerns about the future of digital assets in general and the sustainability of the industry have been raised by a surge of bankruptcy filings in the cryptocurrency industry. In this essay, we'll briefly discuss the FTX collapse story.
What's Happened To FTX: Why Is Crypto Tanking?
FTX and FTX US
Due to a lack of liquidity and poor money management, the US plummeted, which was followed by a significant amount of withdrawals from concerned investors. FTT, the native token of FTX, had a sharp decline in value, which also affected Ethereum and Bitcoin, which on November 9 hit a two-year low. The FTX collapse has had an impact on other exchanges, including BlockFi, which declared bankruptcy on November 28.
These are the key points:
Initial reports and sell-offs: Nov. 2 to 8
Sam Bankman-Fried founded the now-defunct FTX cryptocurrency exchange in 2019. He headed as CEO from January 1 to November 11, 2019. By volume as of Nov. 9, the exchange, which had its own token called FTT, was the third-largest crypto exchange.
Alameda Research, a crypto trading company that Bankman-Fried also founded, has a troubled balance sheet as of Nov. 2. According to the research, it has FTT worth billions of dollars as its largest asset.
Changpeng Zhao, popularly known as CZ, the CEO of competing exchange Binance, tweeted on November 6 that he intended to sell out Binance's stockpile of FTT due to "recent revelations that have came to light," referring to an article from November 2 about FTX and Alameda's blurred funds. He compared FTX's situation to the crash of TerraUSD and LUNA in 2022 that tanked the crypto market and cost investors billions of dollars. But typically, such moves aren't announced publicly.
Zhao's announcement caused a sharp drop in the value of FTT during the following day as concerns developed that FTX lacked the liquidity needed to handle transactions and remain afloat. Other coins, like BTC and ETH, also saw a dip in value as Bitcoin hit a two -year low. In a tweet on November 10, Bankman-Fried reported that $5 billion had been withdrawn from the platform on November 6.
Withdrawals freeze, a deal falls through: On Nov. 8–11, Zhao and Bankman-Fried reached a deal for Binance to buy the FTX branch outside of the United States. On November 8, the CEOs of the exchanges agreed to a non- Binding letter of intent, basically promising to save the failing exchange and avert a further market crash.
On Nov. 8, FTX halted all non-fiat customer withdrawals. On Twitter, Bankman-Fried posted a string of apologies explaining FTX's liquidity issues and promising more transparency.
Binance withdrew from the deal. On Nov. 9, Zhao posted on Twitter that Binance had completed its “corporate due diligence” and said it would not be acquiring FTX. Zhao tweeted that the news reports of “mishandled customer funds” and “alleged US agency investigations” contributed to his decision. Bankman-Fried appeared to reference Zhao’s influence on FTX’s fall in a cryptic post on Twitter where he said, “Well played; you won.”
Bankruptcy and hacks: Nov. 11
On November 11, FTX announced that FTX, FTX.US, and Alameda had officially filed for Chapter 11 bankruptcy. In contrast to Chapter 7 bankruptcy, which involves the liquidation of assets, Chapter 11 bankruptcy enables businesses to restructure car their debt and operations.
FTX.US temporarily stopped accepting withdrawals on November 11 when FTX announced its bankruptcy, despite earlier assurances that FTX.US was unaffected by FTX's liquidity issues. Later, withdrawals were reopened.
FTX and FTX.US
On the evening of November 11, there appeared to be a hack that emptied US wallets. More than $600 million was stolen from the wallets. FTX posted about the hack on its support channel the instant-messaging service Telegram, saying, "FTX has been hacked. FTX apps are malware. Delete them. Chat is open. Don't go on the FTX site as it might download Trojans." Trojan are malware that poses as legitimate software.
Hackers were reportedly attempting to gain access to FTX-related bank accounts, according to a Twitter user.
US. Plaid, a service that connects consumer bank accounts with financial applications, blocked FTX's access to its products in response to "concerning public reports," even though they didn't see any evidence that its tools had been misused illegally.
The same evening, FTX general counsel Ryne Miller announced on Twitter that due to the "unauthorized transactions," or apparent breach, the business will quickly move any remaining assets to cold storage, which is offline.
Why Is Crypto Tanking: Briefly Story Of FTX Collapse -- Hopefully, reading this article can help you to understand it better.
