FTX Meltdown

Hey guys! It’s been crazy! I’ve prepared this special newsletter to tackle all of the mayhem and craziness of crypto in the last weeks. If you’re not familiar with crypto and FTX or if you heard about it and are worried about what could happen to crypto as an industry, please read on.

We recently had a live show dedicated to discussing what happened, what this means for crypto, and what will happen next. Watch this for the full breakdown:

This is the FTX Meltdown explained…

What is FTX and what happened?

In case you haven’t seen the news about it yet, FTX was the second-largest crypto exchange company in the world. It was one of the major players in crypto funding mega-businesses, being a name partner for large sports complexes all over the world, and behind the funding for many charitable projects all over the world. It was leading crypto all over the world.

This company is owned by a tech genius, a self-proclaimed altruistic billionaire, and the face of this whole meltdown: Sam Bankman-Fried.

Sam Bankman-Fried or SBF was known for more than his crazed hair. He was known for his crazy good ambition and for becoming one of the youngest billionaires in the world. At age 29, his company FTX and Almeda Research was already “worth” more than $30 billion USD.

Operating from a mansion in the Bahamas, the man made his billions by trading Bitcoin across countries and setting up one of the biggest crypto exchanges in the world.

Crypto exchange: a business/platform that facilitates the exchange and trade of crypto for other assets, such as conventional fiat money or other digital currencies between customers.?

INVESTOR TIP: Not your keys, not your crypto. Any crypto stored in exchange is subject to hacking or meltdowns like this. Make sure to have your own wallet to keep your investments safe.?

Everything was smooth sailing for a few years but this bear market exposed a lot of new things about the company and it shed A LOT of light on the company which led to it crumbling down and creating a mess in the crypto industry.

The problem? Shaky reports, money handling, and a lot of secrets within the company.

What happened to FTX?

1.According to this report by Coindesk, Alemeda holds $5B FTT. This meant that FTT tokens are not worth what the market is showing. This created a lot of doubt about the true value of FTT and raised questions about FTX and SBF.

FTT Tokens: A token created by FTX to facilitate exchanges within the platform. Similar to Binance’s BNB.

2. CZ, owner of the biggest crypto exchange in the world, Binance tweeted that he’ll be liquidating his $548M FTT tokens mitigating risk and learning from LUNA. This caused a lot of fear in the market. CZ already had some concerns about SBF because of his ties with high-level politicians in the USA and his stance against crypto decentralisation which is one of the deep-rooted ethos of the crypto industry.

3.All of these caused a lot of fear in the market which resulted in the value of FTT being dumped by 80% from $25 to $3. With FTX relying on the price of their coin to prove the value of their company, SBF was struggling.?

4.FTX is now in the deep end and looking for a way out. CZ (Binance) was planning to buy out FTX but upon due diligence, they discovered that FTX was hiding a lot of skeletons in their closet. They needed a total of $8 Billion to cover users’ funds.

a. SBF was using users’ funds to invest and leverage into other businesses like Alameda Research (which is also owned by SBF)

b. There are questionable relationships between heads of the companies.

c. More questionable relationships with high-level government officials including Gary Gensler and contributed a lot of user funds to these campaigns.

d. Some allegations of substance abuse and stimulants offered to his employees to increase productivity.

5.This now snowballed into a disaster.?

a. The Bahamas Securities Commission froze all FTX assets and related entities.?

b. 24 hrs later, SBF resigned from FTX and filed for bankruptcy for all FTX entities including FTX US.

c. FTX has been “hacked” over the weekend after their assets were supposedly frozen and there are now speculations that this was done to funnel out assets for themselves.?

What Now for Crypto and What can we learn from this?

1.Exchanges are now under close scrutiny

a. Call for exchanges to come out with proof of reserves. Binance posted some of their proof of reserve on Twitter while other exchanges are struggling to completely share their balance sheets.

b. CZ is now focusing on industry revival. He is creating a recovery fund for good projects facing a liquidity crisis.

2.More people are realising the problem with CENTRALISATION.

a. Satoshi’s vision for BTC is to break out from centralisation and financial institutions that could be hurting us and yet, we haven’t listened.

b. What happened was not a crypto and blockchain problem. Unfortunately, this was heavily dependent on humans and they’re in control of these Web2 platforms. This showed the typical human issues like misuse of funds and more.

3.This is a lot like any financial crisis that has happened all over the world. This is called a bankrun. This happened to Greece, Venezuela, Lebanon, Sri Lanka, Russia, and the 2008 Global Financial Crisis. We will rise from this. This is just weeding out the sketchy and untrustworthy players in the market.?

What’s Next?

We forge forward!

This could set the crypto industry back a few years and add gas to the fire of doubters but honestly, this only exposes the TRUE NEED for crypto.

It’s not only a money-making machine. It’s not shit coins and power-tripping rich cowboys that pump value to somethign with no real use.

We have to go back to what Satoshi’s intentions for Bitcoin. It is a way for us to break out from the matrix we live in. Centralisation is not good – no matter if its through a government, a bank or a cryptocurrency exchange.

The future is and will always be getting out of that. Decentralised Finance is building a new world where the pride, greed, and fear of humans cannot tamper with its value.

This is not the first time we’ve seen a black swan event in crypto and yet, we have withstood the test of time.?

So, we continue to move forward and celebrate that worldwide adoption is still strong. New innovations with strong foundations are still coming.?

Crypto will come back from this stronger than ever and now, we’re excited to be at the forefront of it. To get updated on any developments, and great things coming in crypto subscribe to this newsletter and I’ll keep you posted.

Keep calm and HODL on!