With the world’s second largest cryptocurrency exchange in complete crisis, we’ll be looking at what’s happened to FTX, why it happened and what it means for the future of crypto.
The FTX saga in a nutshell
As one of the fastest growing crypto exchanges, there’s no doubt that the fall of FTX has shocked the industry. Their biggest rival, Binance, was set to finalise a deal to acquire the company, but ended up pulling out of the deal last-minute.
As a result of this, FTX had to file for bankruptcy, after relying on Binance to seal the deal. Sam Bankman-Fried, founder of the crypto trading firms Alameda Research and FTX, resigned after a crypto publication was released, causing explosions and doubt to surround the entire industry.
The report stated that Alameda’s assets were tied up in FTT, a coin that was invented by FTX, ultimately raising questions about FTX’s liquidity. Days later, the CEO of Binance decided to liquidate around $530 million worth of FTT, with customers racing to pull out. This resulted in $6 billion in withdrawals over 72 hours, which was too much of a struggle to fulfil.
Following the aftermath of the report, this caused Binance to walk away from the deal. The findings found mishandled customer funds, which meant a potential investigation was underway.
Will cryptocurrency survive?
The industry has struggled to appear reliable and trustworthy to regulators, investors and potential customers. The collapse was a blow to various investment firms, celebrity endorsers and regular users of the crypto platform who are consistent supporters.
After the report was released, investigations began, with the American Justice Department looking further into the improperly used customer funds. This is a step backwards for the industry, knocking their credibility once again.
Plus, the price of FTT has dropped more than 90% since the start of November. The price of Bitcoin is also down by around 19%.
However, long-standing supporters believe that crypto will survive, despite the need for more regulation to be put in place to avoid such a collapse in the market again.
What about Blockchain?
The future of Blockchain has been magnified following the bankruptcy filing and the drop in cryptocurrencies. Despite the controversy, blockchain technology has been a leading innovation across many technology companies around the world.
Blockchain provides a secure way to store and manage data, allowing organisations to track transactions, assets and interactions in the trading world. This offers an element of reliability, providing a source that everyone can appear to trust.
This downfall has initiated leaders of crypto organisations to take a more strategic approach, ensuring their business’ are fully secure and are benefitting from this form of technology.
