Bitcoin Loses More Than 25% of Its Value in Days After Crypto Platform Ftx Declares Bankrupt.
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| [FTX bankruptcy leads cryptocurrencies towards crush] |
Ftx, a cryptocurrency platform, has entered an aided bankruptcy procedure, and CEO Sam Bankman-Fried has resigned. However, the cryptocurrency industry is now trembling, with Bitcoin going below $17,000 for the first time in two years. The demise of Ftx has caused havoc in the realm of digital currency.
Indeed, Ftx is not a common name. FTX is, or was, one of the world's largest virtual currency exchanges (with a business valuation of $ 25 billion until recently), with investors including BlackRock, Sequoia, and even the Ontario Teachers' Pension Plan (Canadian Provincial School Teacher Retirement Fund with an established reputation among institutional investors). The company's capital, both economic and reputational, evaporated in a matter of hours, also as a result of tweets made by the CEO of Binance, a rival of Ftx, in which several concerns in the structure of Ftx's share capital were highlighted.
Last November 2, concerns were raised regarding the viability of the financial sheet of Alameda Research, a trading firm created by FTX founder Samuel Bankman-Fried. Alameda's debt, worth $8 billion and dispersed by FTX, would be substantially backed by FTT, FTX-issued tokens. Changpeng Zhao, the founder and CEO of Binance, officially disclosed intentions to sell approximately $500 million in FTT on November 6. The token's value plummets, and panic spreads among FTX consumers, who begin selling the cryptocurrencies held on the site. To prevent being swamped by a 'run over the counter,' FTX prohibits withdrawals, thereby freezing the assets of its clients.
On November 8, the crisis reaches a head. In the midst of a liquidity crisis, FTX seeks assistance from Binance, which announces the potential of a deal to salvage the now-ex-rival by purchasing it. Meanwhile, it is mostly clients whose money have become stalled, if not completely lost, who pay. While Bitcoin is no longer a minor presence on the balance sheets of many banks and investment funds, the American listed bank Silvergate capital, which provides loans with digital assets as collateral, has seen a dramatic drop on Wall Street. However, how many equity firms, banks, private equity funds, and venture capital funds have substantial exposure to cryptocurrency exchanges?
"The problem with the crypto world is that, despite being a completely new global financial system, players in this sector continue to make the same mistakes that have been done in the "traditional" financial system over the previous 150 years," Andrea tells Today. Unger is an international merchant. "Among these are poor risk management and a proclivity for overexposure, which, predictably, are at the root of the events that followed the Earth's descent in May." The shutdown of the well-known blockchain has in reality generated a domino effect, resulting in the collapse of many investment funds and even incredibly significant entities, like FTX, one of the world's largest cryptocurrency exchanges. And it's unclear if the ripple effect has gone off or whether other realities will stay involved. To compare it to regular finance, we might say it is the crypto equivalent of Lehman Brothers," Unger argues.
"As a result, it is not unexpected that markets are currently trending downward with extreme volatility. Of course, none of this means that the crypto world should be avoided like the plague. Investing in this area is feasible, as long as it is done with due caution. To operate on cryptocurrencies, like with any regular market, it is critical to understand the dangers and apply a number of risk-mitigation procedures. Among them, I would underline the significance of maintaining a high degree of diversity in order to readily absorb the ramifications of any declines, collapses, or unfavorable occurrences "Unger says.
The failure of Ftx, the world's fourth cryptocurrency exchange platform, poses a threat to other token exchanges. The market attacked Crypto.com throughout the night between Sunday and Monday: the site, which has its headquarters in Singapore, saw its native currency, Cronos, liquidated. The token dropped 28% in a week, only to rebound and settle at -15% at $0.061. In any event, there is still a lot of stress in the industry. Bitcoin is still down 4.24% to $15,992, while Ethereum is down 6% to $1,190. The Binance currency fell 4.51% to $273, a 20% decline from a week ago. Algorand reaches the year's low of 0.247 dollars: the -11.3% of the night increases the week's total account to -42%.