On the 11th day of November 2022, the crypto world was shocked by the news of the collapse of FTX, a renowned cryptocurrency platform for the exchange of tokens and coins. Founded in 2019, the platform has amassed over one million users and is the third-largest crypto exchange platform,
Unfortunately, the company could not meet up with liquidity demands, and this led to its declaration of bankruptcy and subsequent closure. There have been several debates that Binance had a considerable role to play in the collapse of FTX. The sections below will prove the validity of these statements viz-a-viz critical examination.
Also Read; Reflecting on Crypto’s Evolution: A Year Post FTX’s Disruption
How Did Binance Play a Role in the FTX Collapse
The recent FTX collapse was spurred by a leaked document that showed Alameda’s holdings were primarily in FTT. Following this, Binance promptly began selling off all its FTT holdings which were worth at least half a billion. As expected, Binance’s large request for liquidity spurred other customers with holdings to begin to liquidate their tokens held on the platform.
In the throes of the company’s impending downfall, Binance proceeded to agree to acquire FTX, whose token had already gone as low as $14.57 at the time. The company also suspended all withdrawals and offered users discounts on their trading feeds and referral commissions.
Notably, while its counterpart was experiencing an all-time low, Binance’s Coin, BNB, shot up to a record $368, and the acquisition, if successful, was set to be the acquisition of the decade. Of course, Binance had to commence due diligence on the state of the company, but it instructed its employees not to trade FTX in the interim.
Unfortunately, the deal fell through as Binance pulled out a day after the announcement because of FTX’s unappealing numbers.
Thus, the fate of FTX became inevitable, and its CEO Sam Bankman Fried had to file for bankruptcy a few days later.
What Should the Crypto World Expect Following FTX’s Collapse
While some currencies like BNB have benefitted from the FTX collapse, the company’s predicament has adversely affected the outlook of cryptocurrency globally. Many have opined that this collapse may have long-lasting impacts on the future of cryptocurrencies and blockchain technology. The prices of cryptocurrencies, which have been falling throughout the year, have taken a deeper dive due to FTX fall.
Dr Anandadeep Mandal, an Associate Professor in Finance at the University of Birmingham, stated that there are several challenges that the industry has seen over the years. As a result, devaluation has become inevitable. It would seem that the world may begin to see the regulation of cryptocurrencies due to the FTX collapse. In a bid to protect against consistent risk and bankruptcies, the decentralized nature of cryptocurrencies, which is a massive part of its appeal, may cease to exist sooner or later.
Also Read; Should You Be Worried About The FTX Bankruptcy And Crypto Crashing
Conclusion
One cannot dispute the fact that FTX collapse was unprecedented and has set many other unprecedented events into motion. Unfortunately, those may not spell good for the cryptocurrency industry. Either way, we all would just have to wait and see how things pan out.
