FTX’s crypto exchange run, along with the unsuccessful takeover attempt by Binance, has led to confusion and turmoil in the crypto market.
The digital asset is in crisis- for a second time. In just a matter of three days, almost $200B has been erased from the crypto market, as the third largest exchange in the world by trading volumes risks a full subside.
Bitcoin (BTC) alone is dropping over 75% from the ATH it saw last year, having dropped off to its minimum price since the last quarter of 2020. However, this is nothing compared to the losses witnessed by FTT, which is the native crypto for the beleaguered FTX exchange.
The digital asset that was included in the top 20 cryptos worldwide as recently as last week is behind almost 90 percent in just a matter of four days, having viewed its luck mirror those of FTX.
So, what is the reason behind this crisis? Is it over? Where will the cryptocurrency market go from here?
Subsequent to one of the most extended times of stability in cryptocurrency history, cracks started to emerge last weekend when the chiefs of the world’s biggest crypto exchange announced that the firm would be selling its whole holdings of FTT.
Chanpeng Zhao also called CZ, Binance Chief Executive Office cited, “current leaks and exposures which have come to light for settling hundreds of millions of dollars worth of FTT. The announcement followed a statement in Coindesk that questioned the connection between FTX and Almeda, one of the biggest trading firms in the country, both of which were established by Sam Bankman Fried.
According to the crypto publication, an exclusive financial paper revealed that forty percent of the $14.6B balance sheet of Almeda was made up of FTT holdings, so it only means that the trading company rests on a basis mainly made up of a coin that a sister company made, instead of an independent asset like the US dollar or Bitcoin.
Issues regarding the financial condition of FTX resulted in billions of dollars worth of digital asset withdrawals in only a couple of days ( three days to be exact), causing the whole crypto market to plunge, as well as leading to a liquidity emergency for FTX.
Prior to reaching out to Binance Chief Executive, Sam Bankman Fried sought the support of traders and investors alike, who agreed to a non-binding agreement to takeover the rescue deal. On the other hand, in just a matter of 24 hours, Sam Bankman pulled out, which caused the crypto market to nosedive even further.
In a report posted on a social media site, Binance wrote, “In the start, our home was to be able to help customers of FTX to give liquidity; on the other hand, the problems are beyond our control or capability to provide support.”
The future of FTX stays unstable and shaky, with Sam Bankman Fried trying to put in plain words his company’s position in a long Twitter thread on Thursday.
In his post, he asked for forgiveness. That is the biggest thing, and he fucked up and must have done better, he added. He also stated that, at this point, his main concern is doing right by users. He also promised to do the whole thing he could to address the problems.
In a lengthy Twitter thread, he stated that they are spending the week doing the whole thing they can in order to raise liquidity. He can’t make any promises regarding the issue, but he will try everything.
The scope of the resulting recession is extremely severe; in fact, many crypto experts and analysts warn that it risks destabilizing the wider economy.
So far, cryptocurrency losses by retail and online asset institutional participants have mainly contained in the crypto market, a credit advantage for banking institutions and proof of banks’ relatively cautious method to token in view of the uncertain regulatory environment, this is according to Fadi Massih, Moody’s Investors Service Vice President.
On the other hand, should leverage once more build substantially in the cryptocurrency finance system, it could make the banking system anxious, even when banks keep on distancing themselves from the direct interface with the cryptocurrency economy.
Will Bitcoin price bounce back in these coming days? Will see!
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