The quick downfall of FTX left the crypto industry in shock and it happened just when the Global cryptocurrency market started to heal from Luna and Terra crash, new tax regulations in countries, and regulatory tightening lead to payment issues, and now the FTX crash created a huge mess.
This downfall of a $8-10 billion deficit in its balance sheet affected the crypto market on a large scale and grave liquidity issues never seen before have risen in the market.
How did the downfall of FTX happen?
Here’s how the whole story unfolded, on 6 Nov. 2022 the CEO of Binance tweeted that company had decided to liquidate any remaining FTT on its books. After that announcement to buy FTX’s non-U.S. operations in a bailout came which was soon canceled by Binance saying they were not satisfied with the way FTX’s group is handling finances. Not long after that FTX filed for bankruptcy, and this news sent a wave of shock in the crypto market. Fear, panic, and uncertainty can be felt among crypto investors worldwide.
The collapse of the crypto market
The world’s second-largest crypto exchange, a company that was valued at $32bilion just collapsed. Just like that and it all happened very quickly.
This crash cast a dark shadow and even affected the performance of the biggest cryptocurrencies Bitcoin and Ethereum. Both cryptocurrency prices saw a major drop. On November 11, 2022, Bitcoin (the largest cryptocurrency), traded at an almost two-year low of around $16,600 and Ethereum dropped more than 8% and traded around $1240 after FTX’s bankruptcy announcement.
Moreover, other cryptocurrencies also experienced a downtrend and showed double-digit losses that included Dogecoin, Cardano, Solana Ripple, etc.
What FutureFi’s Founder and CEO said?
Amidst the confusion and uncertainty regarding transparency in the crypto world that lead to the crash and users’ huge losses. Mr. Durga P Tripathi (Founder & CEO of Future Finance) expressed his surprise and shared a piece of wise advice for investors.
Mr.Durga said “when exchanges get funds they start using them for their benefit and investment but when their investment collapse and crypto withdrawal flow gets affected this creates a sense of uncertainty among users, which leads to more withdrawal and exchanges’ collapse. That’s why one should always utilize funds for their original and solo purpose which they are meant to be used.”
He advised exchanges to bring more transparency via Proof-of-Reserves (POR) and Anti-Money Laundering (AML) should be followed strictly to put a stop to the AML activities through crypto. Regular screening is essential to make sure AML rules are being followed properly, high-value transactions and deposit transaction screening are crucial as well, and his company’s exchange TradeKIA is following with all its might.
FutureFi also started applying PoR on its exchange to bring more transparency and is meeting rigorous standards for liability, accountability and exceeding the transparency offered by legal financial firms.
Was there a way to avoid this crash?
To this, Mr. Durga said, yes it could have been avoided, it was not hard for a big organization like FTX to raise funds and deal with the deficiency of funds. Alameda research labs were their base company in the beginning so it was not difficult for FTX to aid themselves rather than filing for bankruptcy.
For example: Recently a hacker exploited a bug in Ankr’s chain and they suffered a loss of $15 million they worked hard to manage the situation, safeguard their chain, and support their community they bought back $15 million because they wanted to. Just as Ankr’s fulfilled their exploitation by themselves or by investments, FTX could’ve done the same as being a huge organization it was not hard for them.
But maybe politics had a huge impact on the whole scenario and leaders just didn’t want to carry it out and found no easy way out of the situation. Regulations were blamed for the last crash and this time it was FTX,
This collapse greatly affected the crypto market, it creates a huge negative impact especially when you are a leader in the market. People look up to big exchanges like FTX, and its collapse shook the crypto investors to the core and created a sense of uncertainty.
Though crypto community should not be dependent on a single organization or multiple organizations or individuals because then the whole purpose of blockchain goes down the drain. Blockchain supports a non-dependent community and gives power to individuals.
Advice for crypto investors
Now the crypto market is getting aware with each passing day and investors should have long-term vision during ups and downs. And use these crashes as an opportunity.
Investors should have patience and never lose the basic fundamental of investment. The market dealt with Luna, Terra crash and tax regulations and surely we can deal with this crash as well.