You have likely heard of FTX’s recent misfortune. This has likely planted some doubts about the future of cryptocurrency in the minds of investors and enthusiasts. However, we are here to address any concerns you may have and to reassure you that this does not in any way represent the crypto community as a whole.
- The $32 billion FTX corporation collapsed in a few days.
- The value of the FTT token dropped by 90%. The cryptocurrency market lost $640 million in liquidity.
- Binance had agreed to purchase FTT but later backed out.
There was a $2 trillion loss in the cryptocurrency market in May, and one crypto firm, FTX, bailed out several failing businesses by providing them with financial support.
Read more: CEO Sam Bankman-Fried Resigns, FTX Files For Chapter 11 Bankruptcy
This week, however, FTX needed a rescue, and a competitor, Binance, appeared to be on the verge of providing it. Soon after, however, Binance announced it was abandoning plans to acquire the firm.
So the story goes like this…
Sam Bankman-Fried established the cryptocurrency trading firm Alameda Research in 2017, prior to the launch of FTX. Since they were successful in this endeavor, Sam reasoned, “Why not let others do it too?” He saw a need for an exchange where cryptocurrency could be bought and sold, thus he created FTX in 2019.
Here are three points to consider:
- To generate a profit, Alameda Research engages in cryptocurrency trading.
- FTX – Facilitates trade between buyers and sellers for a charge.
- FTX has released a token called FTT in an attempt to attract investors. Transaction costs on the trading platform are reduced for holders.
In December 2017, Mr. Zhao completed the sale of his FTX holdings to Mr. Bankman-Fried, who made a portion of the purchase price in FTT tokens.
CoinDesk, a cryptocurrency news outlet, reported on a document that had been stolen on November 2 that claimed to show that Mr. Bankman-hedge Fried’s fund, Alameda Research, possessed a considerable number of FTT (FTX Token) tokens. In spite of their apparent separation, the investigation suggested a financial relationship between FTX and Alameda.
Due to “recent developments,” Binance announced on November 6 that it would be liquidating its FTT tokens. As a result, the price of FTT dropped and investors raced to sell FTX out of worry that it would go the way of other failing cryptocurrencies.
In the span of three days, FTX had to scurry to fulfill withdrawal demands totaling an estimated $6 billion. It appeared to experience a “liquidity crisis,” in which it ran out of money and was unable to meet customer demands.
However, just as we believed the Sam Bankman-Fried era was drawing to an end, CZ offered assistance. He offered to bail out FTX pending a thorough investigation. However, upon examination of FTX’s financials, Binance withdrew from the transaction.
Mr. Bankman-Fried said at the same time that the deal would protect customers and let FTX finish processing their withdrawals. He tried to put an end to rumors that FTX and Binance were at odds with each other by saying, “We are in the best of hands.”
The price of FTT dropped to less than $5 as investors sold in a panic and users attempted to withdraw their funds from FTX. As a result, the market experienced a “liquidity crisis,” or a lack of available funds.
By Tuesday, November 8th, it was obvious that despite the “this is fine” meme circulating online, the structure was in fact completely destroyed. Bankman-Fried declared that a “strategic transaction” had been struck between FTX and Binance (he claims FTX US is still fine). A non-binding letter of intent to acquire FTX was signed by Binance, according to Zhao. The fact that it was not legally binding ended up being crucial, as rumors quickly spread that Binance may withdraw.
There had been tension between Zhao and Bankman-Fried for some years, with Zhao not being a fan of Bankman-Fried’s outreach in the United States, but this was the first time it had come to a head. A break in hostilities was possible after the proposed agreement, but that doesn’t appear to have happened. Bankman-Fried tweeted on Thursday, seemingly referring to Zhao: “At some point I might have more to say on a particular sparring buddy, so to speak.” But, you know, people in glass houses shouldn’t throw stones. All I can say is, “Well played; you won” for the time being.
It is not yet clear why FTX and Alameda were so susceptible, but more information will become available in the coming days, or weeks, as the case may be.
Investors were told by Bankman-Fried that he needed $8 billion to meet customer withdrawal demands.
How come the Crypto Market has been impacted by the FTX situation?
For a long time, the cryptocurrency business has battled to win over authorities, investors, and regular customers. The market has been startled by the decline of FTX, which appeared more stable than other companies, and the withdrawal by Binance.
The price of FTT has dropped by around 80% since Tuesday. Bitcoin and Ether, two of the most valued tokens, have had their prices swing considerably since Tuesday, with Bitcoin’s plummeting by over 20% at one point.
The question is whether or not Mudrex’s Investors’ money is Secure.
In retrospect, what transpired with FTX was regrettable. Regular people invested their money together with the big shots. There was no reason for it to occur, but it did. Don’t let this unfortunate event dissuade you from the fantastic work that is being done in the crypto community. In reality, crypto is working toward global transparency, which is something FTX hasn’t embraced.
One possible result is that regulators will go after Sam Bankman-Fried. Such ambiguity highlights the importance of regulating the industry to ensure that genuine exchanges can continue to meet the needs of their customers.
We encourage you as a retail investor to use this time to properly plan your crypto investments; yes, we know the old adage “don’t put all your eggs in one basket,” but it bears repeating.
To conclude, we want to reassure all of our investors that their money is secure with us. Binance is behind the Mudrex Wallet.
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