FTX Drama in Last 48 hours

FTX has fallen from a multi-billion dollar company to nothing overnight. On November 10, market data showed that bitcoin had fallen below $16,000, the lowest point since November 2020.

The incident first started with an article published by Coindesk on November 2, which suggested that Alameda Research under SBF (FTX founder) may have a problem with its balance sheet.

Alameda's?assets?are?mostly?cryptocurrencies?issued?by?its?sister company?FTX's?platform?coin?FTT?as?well?as?Solona. As soon as the article was published, user sentiment began to fester and concerns were raised about the liquidity of FTX.

On November 6, Caroline Ellison, co-CEO of Alameda Research, finally responsed on twitter that the balance sheet disclosed by CoinDesk was only a portion of the company's assets, with over $10 billion in additional assets not reflected, and that the majority of the loan had been returned.

However, on November 6, Binance founder and CEO Changpeng Zhao (CZ) tweeted that he would sell all the FTT in the next few months, worried that the FTT would suddenly collapse like Luna.

Alameda couldn’t sit still and immediately offered to buy all the FTT that Binance was selling for $22 per coin,?but many people were skeptical about whether FTX could really come up with $580 million to buy back the tokens.?The battle between FTX and Coin has reached a fever pitch.

However FTX did not show enough financial strength to convince users. Although the price of FTT hovered around $22 for a while, people began to fear that FTX would collapsed like Celsius, Blockfi, Voyager, Luna and over $1 billion of withdrawals were generated on the FTX platform. FTX started facing a liquidity crunch and then they suspended withdrawals.

SBF also responded on November?8 , accusing its competitors of deliberate smearing and the platform had sufficient capacity to repay its users' assets. However, at?this time platform users were still frantically withdrawing their funds, stablecoins on FTX were rapidly drying up, and a large number of speculators were waiting for the opportunity to short FTT, which eventually failed to hold the $22 lifeline and fell all the way down.

On November 9, Zhao Changpeng, the founder of the Binance trading platform, suddenly announced that the CEO of FTX came to him for help due to a liquidity crisis, and Binance signed a non-binding letter of intent with him.?

In a statement on November 10, Binance?said?that, "We wish?to be able to support FTX customers to provide liquidity, but these issues are beyond our ability to control or help." Binance?has stressed that whenever a major player in the industry collapses, retail investors suffer losses. Over the past few years, Binance?has argued that cryptocurrencies have the resilience and that aberrant actions that misuse user funds will sooner or later be eliminated by the free market. This also meant that after just one day, Binance?chose to abandon its acquisition of FTX,the other?cryptocurrency giant in the industry.?

Another key piece of news is that US regulators are starting to take notice of the FTX debacle. The US Securities and Exchange Commission is deepening its investigation into FTX, and the Commodity Futures Trading Commission (CFTC) is now investigating the trading platform.

According to COIN statistics, a total of 270,000 people lost their positions in the last 24 hours, with $4.2 billion of funds went up in smoke. A total of 640,000 people burst their positions in the last 48 hours, with $12.6 billion of funds evaporated.

Meanwhile, Sequoia Capital just marked down to zero the value of its stake in the cryptocurrency exchange FTX. When Sequoia invested in the Series B round of FTX in July 2021, the high-flying, Bahamas-based outfit was valued at $18 billion. Two months later, the company was valued by investors at $25 billion. In January of this year, FTX raised a $400 million in Series C round that brought its total funding to $2 billion and its valuation to a breathtaking $32 billion.

The disappearance of FTX has the potential to be devastating to the entire crypto industry.

Source: Cryptotelegraph\Twitter\Techcrunch

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