The crypto industry is in a bad place: Bitcoin and Ethereum have reported record lows after suffering a series of blows. However, as usual, somebody else often makes money whenever somebody is losing money. Check out the Moni Talks website for all the latest news and analysis as the crisis unfolds.
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What is FTX?
FTX is a platform for cryptocurrency exchange, similar to better-known exchanges like Binance, Kraken, or Coinbase Exchange. In 2021, the company was valued at $18 billion and had more than $1 billion in revenue. In November 2022, allegations of dodgy dealings surfaced, and the company was sent into a downward spiral from which it never recovered.
Following these allegations, whether they were true or not, investors lost confidence in the company, and all started trying to pull their money out of FTX at the same time. As a result, the value of FTT – FTX’s cryptocurrency – plummeted dramatically. Around $6 billion was withdrawn by panicking investors in about 72 hours, and FTX was effectively bankrupted.
The founder of FTX, Samuel Bankman-Fried, may have managed to transfer some of the remaining customer funds to one of his own companies illegally just before the collapse – but not surprisingly, he denies this.
The Future of the Crypto Industry
This incident is likely to have severe effects throughout the global crypto industry. Many people already don’t have a lot of faith in cryptocurrencies, and the failure of FTX will make the cryptocurrency market appear even less attractive to investors. As a result, the EU is talking about introducing new regulatory rules on crypto that could help guard against this kind of disaster.
Even the banks have been hit hard. For example, Silvergate Bank – a California bank specializing in services and solutions relating to digital assets – declared bankruptcy on November 11th last year. The organization referred to the state of the crypto industry in general and the FTX collapse specifically as part of the reason it was forced to do so.
People who are already suspicious of cryptocurrencies may feel more or less justified: the cryptocurrency markets are very volatile and can collapse completely. But just remember that the same thing can happen to any currency. What about the hyperinflation in Germany during the First World War? Those Germans were using Deutschmarks for toilet paper!
It’s time to think whether it’s time to return to keeping our money safe in our piggy banks.