Brussels (Brussels Morning) – FTX became one of the most prominent and largest growing crypto exchanges in the world. It crept to the top in the crypto derivatives market. However, after some time it saw a sudden collapse and everything went wrong. After becoming the second-largest cryptocurrency exchange in the global market, the downfall came as a huge shock for everyone.
As this company was counted as a major one in the market no one thought it will come down that easily. FTX saga has a mammoth $32 billion value considering the funding round in January 2022. Sam Bankman Freid was influenced globally and has been vocal about the regulation of cryptocurrencies. The financial support for this crypto exchange has been massive.
What Is The Controversy Surrounding FTX?
Many experts are calling the FTX collapse and comparing it to the “Lehman Brothers moment”. This is a direct reference to the crash that became evident for the fourth-largest American investment bank. There is no doubt it created a domino effect on the global economy in general. It soon became a threatening crisis since Great Depression. However, it will not be wise to declare complete doom for this cryptocurrency.
The fall of FTX may seem temporary for some but it doesn’t mean it cannot grow again. Many investors are still not able to judge the current situation. They need to think of ways that prevent the losses to grow even further. Many experts argue that the collapse of FTX could be the last straw for many prominent investors. Some companies may recover as their average trading numbers are moderate.
What Are The Reasons That Led To The Collapse Of FTX?
The collapse of FTX was first triggered by a report that was presented by the Cryptocurrency news platforms. This report states that Alameda which is owned by FTX founder holds billions of dollars. There are plenty of currency tokens that are introduced by Sam Bankman Fried.
Alameda has soon become of the major traders and market markers at FTX. This fund was used as collateral to lend money to various people. All the funds from Alameda are used to increase the prices for FTX. There were plenty of reports coming out that hinted at fraud and misappropriation while investing the money.
The issue was exploited even further by Changeng Zhao who is the CEO of Binance. In the meantime, his company planned to offload a sizeable amount of FTT holdings. All this came as a shock for previous investors and the word kept spreading among the new investors too. Unfortunately, the total token value came down from $22 to $1 in November this year. The customers of FTX started to withdraw any funds altogether. It gave birth to a liquidity crisis and FTX declared bankruptcy last week.
How Will FTX Collapse Impact The Prices Of Cryptocurrencies?
Due to the FTX collapse, all the cryptocurrencies have to face a downfall of 15% at $887 billion. Most cryptocurrencies are on the red list for now. Bitcoin which is one of the most popular cryptocurrencies is going down by 17.9% within one week. Ethereum is down by 19.1% which is a massive blow.
Solana is considered one of the most promising cryptocurrencies in the market. It will continue to gain a good position. This cryptocurrency is down by 95% which is down from its all-time high price. However, this seems to be the only currency that is maintaining some stability during the time of crisis.
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What Are The Concerns Of Global Investors?
FTX has always been a reliable and significant crypto exchange. While FTT was a popular choice among investors. Many people are investing in this platform and starting to have a lot of losses. A California-based hedge fund has revealed that many of the assets are still locked within the FTX exchange.
According to the new reports it is expected that FTX’s collapse will have a bad effect on the entire cryptocurrency ecosystem. The regular investigation for private cryptocurrencies is likely to increase. All the regulators worldwide are already looking at the situation in the industry. They will like to judge how the company can grow after this huge crisis.
There is no doubt that the trading volumes in the exchange that are likely to shrink after the FTX collapse. To date, the founder has not said anything about recovering from the losses anytime soon. Most of the recent reports are similar to the trading numbers found in September, October, and November. Therefore after the FTX crash, the impact on some exchanges has been minimal.
