FTX, crypto exchange The 2nd largest in the world is going through a crisis and causing its digital asset, FTT Token to collapse. However, how will this affect the crypto market today? Carol Alexander, Professor at the University of Sussex believes the crypto industry will experience a longer winter because of this.
What is FTX?
FTX is one of the crypto exchange The largest headquartered in the Bahamas, FTX itself is managed from the US with its largest offices located in Chicago and Miami. In the US there is also a US FTX operating in several states.
As crypto exchange, the main function of FTX is to help users to buy and sell crypto assets. FTX and its competitor (Binance) have an important role, as they process the majority of crypto transactions in the world.
Both Binance and FTX, are platform working internationally. This crypto is equivalent to an “offshore casino”.
Although both follow the regulations of the US but most of the money that goes into the books is not limited by these requirements.
FTX Case of the Week
On Wednesday (2/11/2022), an article from Coindesk “causing” a crisis in the crypto industry. The media editor claims that Alameda’s financial statements, the crypto hedge company owned by Sam Bankman-Fried, holds the FTT with billions of dollars as collateral for the company’s debts.
If this is indeed the case, then the fall of FTT could be the destruction of both. However, this FTT itself is not worth what FTX promised when it was purchased for US$22.
This raises concerns that the entire institution being built is like a sand castle or perhaps more like a house of cards.
This crisis culminated when Changpeng Zhao decided to sell FTT for US$500 million due to “the recent FTX financial liquidity crisis case.”
Negative effects penetrate in all directions. The price of FTT immediately collapsed and FTX users began to withdraw their funds in large amounts above the system’s capacity limit.
“There was a massive withdrawal spike of US$6 billion for FTT in three days,” Bankman-Fried said. Reuters.
Previously, Zhao wanted to acquire FTX on Tuesday (8/11/2022), but 24 hours later this decision was withdrawn.
“Issues that occur are beyond your control and ability to help,” Binance said, citing findings from due diligence conducted by the US government investigation. The Guardian.
Next FTX How?
The company must find billion-dollar loans to meet customer withdrawals, or cut back on massive drawdowns by finding ways to reassure them that their money is safe.
Of course this is not easy. Based on reports from Bloomberg on Thursday (10/11/2022) Bankman-Fried needs US$4 billion to stay safe, and a funding gap of US$8 billion.
Before FTX agreed to be sold, SBF said on its Twitter that FTX was safe. However, Sequioia Capital sold a US$150 million stake in FTX and said the company was not only experiencing a liquidity crisis but also at risk of bankruptcy.
After FTX collapsed, SBF apologized and was ready to take responsibility. Funds lent by FTX are funds from users worth US $ 10 billion or equivalent to an asset value of US $ 16 billion.
Is There Any Impact of FTX on the Crypto Market?
After the FTX collapsed, the price of Bitcoin also declined, which was previously in the range of US $ 20,000 to US $ 16,500 and was at US $ 15 thousand. This figure is the lowest since 2020.
Based on Coinmarketcap data, large companies that use FTX must prove their liquidity capabilities.
For example, Solana, which depends on the FTX value. If this asset continues to collapse and become zero like LUNA, then there is no certainty that the Bitcoin on this protocol can be withdrawn and the millions of dollars in it can just disappear.
Like other cryptocurrencies, Tether has experienced the same thing. Stablecoins with a value of US$70 billion this is off the ‘peg’ and is trading at US$0.98.
“The company has processed the withdrawal of around US$700 million in 24 hours and there are no problems, we continue to do so,” said Paolo Ardoino, CTO of Tether. The Guardian.
What about the Crypto Market in General?
The financial system has turned out to be more resilient to the crypto market over the past 12 months. Crypto value itself is influenced by many things such as macroeconomic problems and others.
In fact, the global financial market is also experiencing a crisis. But this is more due to Russia’s war with Ukraine and rising interest rates.
“The crypto industry will have a longer winter because of this,” referring to the credibility issues of the FTX event, said Carol Alexander, Professor at the University of Sussex.
However, the FTX issue in the crypto market does not affect the traditional market. Because of the nature of investors who want to make more profits than conventional investments when interest rates are high, as is happening today. [az]