Difficult days are passing through the crypto market, after suspicions arose regarding liquidity in the third largest crypto exchange in the world – FTX, the currency of the exchange (FTT), which was used by the company for guarantees for various loans, began to collapse. The collapse of the currency and the rumors led Chenfeng Zhao, the CEO of the largest exchange – Binance, to announce that his company would sell the FTT coins it holds (worth about half a billion dollars) and the situation was made even worse. A huge amount of withdrawals from the exchange (in the amount of 6 billion dollars) also led to the collapse of the largest currencies, among them
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And the fears of the collapse of FTX increased to such an extent that Zao himself announced that he had signed a non-binding agreement to purchase the exchange.
The market received Zhao’s announcement positively and went back up, but the creators turned around after Binance announced that it would not buy FTX, following due diligence that made it realize that it did not want to get close to the rush, which will probably reach a criminal level. Binance’s move sent Bitcoin to its lowest point since November 2020 – 15.5 thousand dollars. All the rest of the market collapsed in the wake of Bitcoin when Ethereum reached the price of $1,000 per coin, Sula collapsed by more than 50% and Ripple was cut by about 30%.
According to reports today, the authorities in the USA are expected to begin an investigation against the company headed by the young CEO – Sam Bankman Fried. Farid shed some light on the current situation in a long thread he posted on Twitter. Fried began his words by saying that he was sorry and that he had “messed up” (he said this in slightly more blunt language). Fried went on to explain that he is the main culprit in the whole problem and that it is his responsibility that we have reached the current situation. He later emphasized that the main goal now is to obtain enough money, which will be able to cover all the assets of the company’s customers. The CEO said that he is currently trying to raise funds (According to reports about 8 billion dollars) from many investors, among them another large stock exchange – Kraken.
So far, the knight on the white horse has not been found, but the crypto actually went up again, the reason – the inflation data, which sent Wall Street to sharp increases not seen since the corona virus. Bitcoin has risen again beyond 18 thousand dollars, Ethereum is also above 1,330 dollars. Despite the current euphoria, it should be noted that the situation is definitely not good and the market will probably realize this soon. Fried’s move violated the trust of many investors and the collapse of his stock market (or even the current situation) are One of the most serious events in the history of the crypto market.
According to the company’s latest fundraising at the beginning of the year, FTX was valued at $32 billion, a significant portion of which is attributed to the company’s currency (FTT). The matter of the company’s currency is parallel to the fact that Apple, for example, will issue itself a thousand “Apple Coins”, will manage to sell half of them for a million dollars in currency in some way and treat itself with another half a trillion dollars in value, without anything standing behind the currency. According to a report by the Washington Journal, Fried’s company lent about half of its clients’ assets ($8 billion) to the subsidiary from which the whole mess unfolded, and it is not clear now how the situation was possible, especially when Fried’s stock exchange and he were very close to the US government and authorities. Fried has not yet A lot of money for the Democratic Party in the last elections and it is not clear that with these large sums they will be able to get him sick from a long prison term after the extreme irresponsibility he took.
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Although all, There are those who also blame Binance for the sharp falls in the market. Binance apparently knew what the situation was with FTX and just gave hope to the market that the situation would be resolved. The company announced sharply and bluntly, and very quickly after the positive announcement of the non-binding agreement, that it would not buy FTX while pointing out its serious problems. Zao said in a post on Twitter (which may sound cynical to many): “Sad day. We tried.” Of course, Zao could have done the whole process in a much more subtle way, but the noise in which he canceled the deal shook the entire market.
Assuming that the market is indeed only in a momentary euphoria, how much worse can the situation get? According to JP Morgan Bitcoin can still reach a price of 13 thousand dollars
The investment bank believes that investors should be careful when the pressure on the market has not yet dissipated. According to analyst Nikolaos Fainigartsopoulou, the situation this time is different compared to previous cases because “there are fewer bodies with strong enough balance sheets to bail out FTX”. The analyst looks in his analysis at the cost to mine Bitcoin and notes that The currency can fall as low as $15,000 or even $13,000, the minimum average cost it costs miners to mine the coin and maintain the network. According to Nicolaus’ analysis, we are expected to see a drop of up to 25% more, When the crypto market reaches a market value of 500 billion dollars in this situation.
It is important to note another event that may come following the collapse of the stock exchange and its subsidiary – One of the coins with the largest market capitalization is the stablecoin Tether. The market value of the coin is about 70 billion dollars and for years there have been concerns about whether the company that issued it actually has the cash and income to back up every coin that it issued. According to some analyses, FTX’s subsidiary – Alameda, was involved in buying more than two-thirds of the total coins issued and then served as a market maker when it sold them to other exchanges (among them Binance).
The involvement of the dubious Alameda, whose website has already been taken down since the beginning of the affair, combined with the concerns about the currency and the fear in the market could lead the crypto market to an unprecedented collapse, as many parts of the market routinely rely on the stable currency. If it turns out that indeed the company behind the stablecoin never had the assets to back it up, the situation will lead to a massive selloff of the coin, which will cause a huge snowball that will likely drop its value to zero, similar to Luna’s case.
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