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This week FTX – one of the largest centralized exchanges in the crypto industry – collapsed. Crypto markets responded respectively as a result of many years of low levels for many digital assets.
To wrap our heads around FTX’s collapse and the subsequent fall, which continues to unravel during writing, let’s take a closer look at the two companies that are the most central in history; FTX and it’s Trading Arm, Alameda Research.
Both FTX and Alameda Research are founded by Sam Bankman-Fried (also known as SBF), a graduate of Mit Physics, who spent his early career as a merchant. As it trades in traditional markets, SBF identifies the opportunities that cryptocurrencies present. In an attempt to take advantage of these opportunities, he and his friend Gary Wang create Alameda Research.
Alameda Research is known to take advantage of the Kimchi Premium by performing cross-border BTC trading between the United States and the Republic of Korea, where BTC traded approximately 10% higher. After taking advantage of this arbitration of Bitcoin’s pricing in South Korea, Alameda soon traded a wide range of digital assets and scaled to become one of the largest market producers in cryptocurrency.
At that time, Alameda was building relationships with very large cryptocurrencies, including support for Binance with large over -the -counter deals (OTC). When FTX was founded by Sam and Gary in 2019, Binance quickly invests.
The private sale and list of FTT FTT marker has attracted traders and investors, and FTX’s affiliation with Alameda Research and Binance has fueled that FTX will be a great success. In 2020, the FTX erupted in popularity, coinciding with “Defi Summer” from 2020, when many Defi protocols survived massive bulls and the Crypto Bull overall market began to take off. For a long time, FTX became one of the largest exchanges of cryptocurrencies in the world, and SBF was one of the most rich men in cryptocurrency, as more and more people began to buy cryptocurrency on the platform.
This leads us to what happened to FTX and Alameda in the last week. The FTX decline seems to start with an article by Coindesk, published on November 2, which revealed that a significant part of Alamed’s assets are held in FTT. In fact, over one -third of Alamed’s $ 14 billion balance was in FTT.
Rumors have begun to spread that FTX’s customer remedies are finding a way to Alamed and feared that FTX is not enough cryptocurrency to honor all the withdrawals of the users, they began to grow. This, in turn, led to FTX withdrawals, which accelerated when users found that FTX cryptocurrency stocks were rapidly decreasing. When Alamed starts withdrawing coins from other exchanges to send to FTX, she effectively confirmed that FTX is under serious pressure.
Enter Binance. Binance has announced that it will sell its FTT. The fear created by this message was enough to collapse the price of the token. Distribution of the word that FTX has begun to stop withdrawals. Then it happened. It was announced that Binance had signed a letter of intention to acquire FTX to “help cover liquidity.” This confirmed – if confirmed – that FTX was in severe circumstances. There was speculation that FTX could be reserved, but after examining FTX’s financial resources and revealed a $ 8 billion hole, Binance withdrew his offer. Now Alamed’s website is also offline.
Last week, no one suspected that FTX was in danger. This week, the whole card house collapsed.
What influence this will have on the crypto industry? Well, so far the market has reacted, as you may expect. It was a sea of ​​red. Another centralized crypto platform collapsed due to corruption, incompetence and greed. But crypto will survive this. Bitcoin’s network continues to produce blocks and incredible projects continue to be built.
These are dark days for cryptocurrency – no doubt – but the main technology remains the same. Satoshi Nakamoto’s vision was one of the fixation of a broken system. Greed has caused this vision to blur. Centralized institutions, customer abuse and criminal activity are the things that cryptocurrencies should allow us to escape. Instead, the industry is pierced by corruption.
The events of 2022 leave scars that will be visible for years in cryptocurrency. Changes must be realized in order to prevent future disasters such as this and to build a cleaner and more light future.
For those who have the funds stuck on FTX, we hope to handle you properly.
In Coinmama, we have always stood up to keep control over your private keys. This recent blast is another reminder of how important this is. Not your keys, not your cryptocurrency. Trade, sell and buy bitcoin and other digital assets safely, safely and conveniently with Coinmama.
