FTX collapsed- Is this the end of Cryptocurrency?

 

Crypto

Dec 16, Amira Tanjum Chowdhury

 

 

What is FTX?

FTX is a Bahamas-based Cryptocurrency Exchange Company that declared bankruptcy founded by Sam Bankman-Fried. This was the fastest-growing Crypto Exchange Company. At its peak time, FTX had more than one million daily users and was the third largest crypto exchange company by volume. FTX’s native token is FTT. The famous Sequoia Capital, an American venture capital company, invested 150 million USD in FTX and wrote a blog post on how FTX will rule the crypto world.

 

FTX’s native token FTT

 

Why was FTX successful?

FTX focused on a particular type of trade called derivatives which are used as hedging tools to help traders and people to manage risk. The founder of FTX, Sam Bankman-Fried, analysed and developed the algorithm to operate these exchanges. His genius move of buying bitcoins at a cheaper rate in different places in the USA and selling it for a higher rate in Japan. He profited more than 30% by trading in Japan. His unprecedented marketing strategy i.e. traders for traders advertisement and institutions based marketing helped him gain the trust of people to invest. 

 

How does the Cryptocurrency Exchange Platform operate?

The most frequent way to begin buying and selling cryptocurrencies and other digital assets is through Crypto Exchanges. Cryptocurrency exchanges are privately held websites that allow users to trade cryptocurrencies for other crypto assets such as digital and fiat currencies and NFTs. Cryptocurrency Exchanges work in binary ways. They are Centralized cryptocurrency exchanges and Decentralized cryptocurrency exchanges. CEX profits from commissions and transaction fees by acting as a middleman between a buyer and a seller. A CEX is analogous to a stock market, but only for digital assets. Binance, Coinbase Exchange, Kraken, and KuCoin are some of the most popular cryptocurrency exchanges. 

Another sort of exchange is a decentralized exchange, which allows peer-to-peer transactions straight from your digital wallet without the use of a middleman. Uniswap, PancakeSwap, dYdX, and Kyber are examples of DEXs.

 

The mechanism of crypto exchanges

 

How was FTX different from other Crypto Exchanges?

FTX stands for Future Exchanges and it was built specifically built for these kinds of exchanges. FTX permitted far riskier trading than other exchanges, as well as highly leveraged bets. It enables customers to trade digital currencies for other digital currencies or traditional money. FTX’s biggest perk was lower fees in trading than other Crypto exchanges. 

 

Why has FTX collapsed?

FTX’s native token FTT has become the primary reason for its collapsion. Initially, Binance, a competitor of FTX, had invested in FTX. Binance had done this to do experiments in the market. Binance never imagined the rapid success of FTX. When FTX became a competitor of Binance, the CEO of Binance declared they are going to sell their reserved FTT and people found it risky to keep their crypto in FTX through Blockchain research. Moreover, the balance sheet of FTX got leaked. The deficiency of money made people distrust FTX and they wanted their assets back. And overnight the 32 billion’s company got collapsed.

 

Leaked balance sheet of FTX

 

 

What is the current situation of FTX?

The embattled exchange declared bankruptcy on November 11 due to a lack of money. In the bankruptcy proceedings of FTX, its sister business Alameda Research and 130 connected firms filed for bankruptcy under the umbrella of FTX Group.

 

How has FTX’s collapse affected the Cryptocurrency world?

FTX plummeted over 10 days in November 2022. During that time, the crypto exchange faced a liquidity crisis as a result of a report indicating probable leverage and solvency issues, and it attempted to arrange a rescue with competitor Binance, which swiftly fell through. The far-reaching ramifications for the future of FTX and the larger cryptocurrency sector are only now being considered.

 

Is the collapsion of FTX indicate the end of cryptocurrency?

The startling collapse of the FTX crypto exchange is most likely an indication that we're nearing the finish of the crypto crash rather than the beginning. This is due to the ability of the largest con artists to provide a veneer of competence to survive the downturn. However, based on previous booms and busts, the path to recovery will be long.

 

The Future of Cryptocurrency after the FTX collapsion

Bitcoin and Ethereum are down more than 50% from their all-time highs in late 2021. While there have been some tiny gains in recent weeks, the cryptocurrency market as a whole remains relatively stagnant. While no one knows for sure, some experts say crypto prices could fall even further before any sustained recovery.