Cryptocurrency exchange FTX has completely collapsed less than a year after it reached its $32 billion valuation. So what exactly is happening?
What is the story of the FTX trading platform ?
The most famous and largest cryptocurrency trading platform is the Binance platform, followed by the FTX platform, which enables customers to trade digital currencies against other digital currencies or against traditional currencies such as dollars and euros, and vice versa. They can be likened to banks in the traditional financial system that we deal with in our daily lives.Sam Pinkman is the founder of FTX, which is based in the Bahamas, a company that preaches cryptocurrency, and has spent millions of dollars trying to bring industry-friendly laws into US laws. Binance, for example, which is led by Chinese billionaire Changpeng Zhao, also operates outside the US and is accused of trying to evade regulations, and the platform and its owner were among the first investors in FTX.
What happened?
Any cryptocurrency exchange has its own version of the currency, which is known as the original cryptocurrency, and it is called a (token), for example, FTX has an FTT token, which customers use to pay transaction fees on the platform. Last year, Chinese billionaire Changpeng Zhao sold his stake in FTX to Bankman, who paid part of that deal in FTT.Bankman not only owns that platform, but he owns Alameda Research, a hedge fund and a big cryptocurrency trading company. On November 2, Coindesk reported a leaked document showing that Alameda Research holds an abnormally large amount of FTX tokens, worth billions of dollars, and is using them as collateral for loans. The problem is that FTX and Alameda are supposed to be separate companies, but the report makes it clear that their financial relationship is very close.
In this situation, any depreciation in the value of the FTT will cause harm to the two companies, given the joint ownership of Bankman. But the FTT coin itself had no real value beyond FTX's earlier promise to buy any of it at $22, which raises fears even more that the company is just a sandcastle. Imagine that your ATM card suddenly stopped working because the CEO of a bank decided to put your money into high-risk deals at another company he owns.
Then, on November 6, Binance announced that it would sell its FTT coins, the equivalent of about $500 million, due to this latest leak. Because of this, the price of the currency fell and those who owned it set out to sell it, fearing the imminent fall of the company.
Entry and withdrawal of Binance company !
Withdrawal requests swarmed on the FTX platform, which amounted to the equivalent of about $6 billion over three days. these requests. Then, two days later, the company turned to Binance, in an attempt to salvage the situation, in which the largest platform announced the acquisition of FTX, but Mr. Zhao added that his company has the right to withdraw from the deal at any time.Bankman then stated that the deal would protect the company's customers and allow it to finish processing fund withdrawals from the platform, trying to dispel rumors of a conflict between his company FTX and Binance. But last Wednesday, Binance announced that it would stop the acquisition of FTX, and stated that it reached this decision after looking at the company’s papers, conducting the necessary legal examinations, and due to ongoing investigations about the misregulation and use of funds from FTX, and from here the situation collapsed even more The dominoes fell, and suddenly the value of the company reached 8 billion dollars, after it was 32 billion dollars.
Then last Friday, the company filed for bankruptcy, and Pinkman resigned as CEO.
The clock is turning back!
Cryptocurrency crashes have become a regular occurrence over the past months, but even for an industry known for its fiery volatility, Bankman's downfall came as a fatal blow. Supposedly, he was the miracle boy of this world, and that he had a vision for the future of the industry in which he imagined that trading cryptocurrency would be as easy as shopping on Amazon.But even with this recent collapse over the past months, the dream and idea of crypto still exists as formulated by Satoshi Nakamoto in the aftermath of the 2008 global financial crisis, which is simply to put an end to the greed of ordinary banks, and make dealing in money without intermediaries between people. But now, through 2022, digital currencies appear to be at their weakest and most importantly, they have shown, time and time again, that they are dominated by an industry similar to the current global financial system.
Before the crypto market crash this year, it seemed like a large portion of ordinary users had started to trust the industry, but the FTX crisis will turn back the clock for years.