Following the FTX Exchange collapse, the crypto company is going through a lot. There have been much-talked warnings of the heavy risks, and the auditors have been put into the spotlight. Here are all the things related to the crypto exchange crash that has affected it greatly.
FTX Exchange Collapse: What Actually Happened?
FTX, one of the largest cryptocurrency exchanges, went bankrupt and sought bankruptcy protection last week. The founder and CEO Sam Bankman-Fried has also resigned. Following this, in the next couple of hours, the crypto trading firm revealed that there had been “unauthorized access”. The funds have also disappeared. The analysts have stated that hundreds of millions of dollars might have vanished.
FTX & Binance: The Deal And The Unravel
FTX possessed a native cryptocurrency token named FTT that the traders used for various operations including paying transaction fees. In 2021, Changpeng Zhao sold his stake in FTX back to the CEO of FTX, who paid partially for it with the FTT tokens. On the 2nd of November this year, a crypto publication reported on a leaked document that appeared to display that Alameda Research, a hedge fund that was run by Bankman-Fried, stored an unusually hefty amount of FTT tokens. That said, both are meant to be different businesses although reports claimed that both had close ties financially.
On the 6th of November, Binance stated that it would sell its FTT Tokens owing to its latest revelations. In response to this, the price of the FTT coins fell suddenly and the traders rushed in to pull out their tokens from FTX. They were fearful that FTX might turn into another fallen cryptocurrency company. FTX then tried hard to process requests for withdrawals that amounted to an estimated $6 billion in just over three days. It seemed that it had entered a liquidity crunch, which means it lacked the money to complete requests.
However, on the 8th of November 2022, Binance stated that it had reached an agreement for bailing out FTX by purchasing the company. In an announcement Zhao mentioned,
“Binance has the discretion to pull out from the deal at any time.”
On the 9th of November, Binance stated,
“Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient, and we believe in time that outliers that misuse user funds will be weeded out by the free market.”
On the following day, FTX announced that it had reached an agreement with TRON, a decentralized, open-source blockchain-based operating system to swap specific tokens from FTX to other cryptocurrencies.
FTX Affecting The Current Crypto Market Conditions
It is a fact that the crypto industry has struggled for a long time to convince its investors, regulators, and customers that the industry is trustworthy. The FTX exchange collapse seemed more stable than the other companies. Additionally, Binance removing itself from FTX has roughened the crypto market. Stating the market price, the price of FTT has declined around 80% since Tuesday. Since November 8th, the prices of both Bitcoin (BTC) and Ether (ETH) have fluctuated a lot and at one point they dropped to over 20%.
According to CoinMarketCap (at the time of writing),
“The live FTX Token price today is $1.48 USD with a 24-hour trading volume of $219,451,053 USD. We update our FTT to USD price in real-time. FTX Token is down 21.70% in the last 24 hours. The current CoinMarketCap ranking is #209, with a live market cap of $486,665,439 USD. It has a circulating supply of 328,895,112 FTT coins and a max. supply of 352,170,015 FTT coins.”
Following the FTX Exchange Collapse, the trading platform is not doing good. Binance has backed off, an expert has stated that the exchanges must mandatorily declare their ‘proof-of-reserves’ and even the prices of the FTT tokens have dropped massively. Even an Indian-origin Nishad Singh is under scrutiny for the financial practice that caused the FTX crypto exchange crash.