As the world of crypto is progressing to heights of great success, some crypto exchanges and markets have faced a downfall over the past decade.
Due to the volatile nature of crypto, it only takes a matter of hours or even minutes to drop the total worth of a currency and make people go bankrupt.
For instance, cryptocurrencies have continued to fall ever since Binance prospectively took over its weak rival exchange FTX, showing how the sector’s top players are now being swept away by the strains in the virtual currency market.
If you’re not a person actively engaged in the ups and downs of the crypto market, the aforementioned terminologies might sound alien to you.
Therefore, before jumping into the downfall crisis of the crypto market, let us first discuss what currencies and exchanges are responsible for the unfortunate series of events.
What Is FTX?
FTX was the third largest crypto exchange company that promoted the transactions and liquidity of tokens and coins. Users of FTX were allowed to exchange digital currencies, make trades, link their wallets, engage in derivative contracts, and purchase or sell NFTs.
FTX Exchange was a prominent centralized cryptocurrency exchange that specialized in providing a variety of trading choices, including derivatives, options, volatility items, and borrowed tokens.
Besides, it offered spot markets to over 300 cryptocurrency trading pairs, including BTC (BitCoin), ETH (Ethereum), XRP (Ripple), and its own native coin, FTT.
The FTX Contagion Concern
Every crypto trader trading with xBitcoin Club acknowledges the fact that the volatility of this market may lead to severe losses. Therefore, always invest at your own risk because the fall of FTX may not have affected you right now, but it might do in the long run.
Sam Bankman-Fried’s $16 billion net worth was obliterated as FTX went from $32 billion to bankruptcy in just a matter of days.
The crypto exchange was found to be experiencing a significant liquidity problem in November 2022, with a $6 billion imbalance between its liabilities and assets.
After a quick fall from glory, cryptocurrency exchange FTX filed for bankruptcy protection. After Sam Bankman-Fried resigned as CEO, John J. Ray III took over and managed Enron’s reformation.
Sam Bankman-Fried is alleged in a class-action case filed on November 16 in a federal appeals court in Florida of developing a false cryptocurrency scheme intended to take advantage of inexperienced investors from all over the nation.
The new CEO criticized Bankman-Fried, claiming that FTX lacked sufficient accounting, auditing, and cybersecurity teams.
The Immediate Effect On Other Cryptocurrencies
As the market processed the likely collapse of well-known crypto exchange FTX, cryptocurrencies continued to decline.
Prices were under pressure as Binance, the world’s largest exchange by volume, decided not to purchase Sam Bankman-Fried’s FTX following a due diligence examination and due to recent allegations of improper handling of customer funds and alleged investigations by U.S. agencies.
As a consequence, the whole of the crypto market faced a severe decline because investors lost interest in risking their assets by investing in cryptocurrencies.
For instance, according to Coin Metrics, Bitcoin dropped from 12% to slightly under $16,000, reaching a level so low that it hasn’t been seen since November 2020. Ether, meanwhile, fell 14% to $1,128.87.
Moreover, after falling more than 75% on one day, FTT fell another 63% in the upcoming days. Additionally, the Solana token kept decreasing. It dropped more than 26% one day before its last falling by 45%.
The Way Forward
The breakdown of FTX is causing severe repercussions. Businesses that supported FTX are already marking down their investments. The demand for stricter regulation of the cryptocurrency business is growing among politicians and authorities.
Moreover, the price of bitcoin and other virtual currencies has been under pressure as a result of this crisis.
According to CoinMarketCap, the net worth of all digital currencies decreased by nearly $150 billion during the last week.
The failure of FTX extends beyond money. Major sporting events, including Formula One racing, a sponsorship with Major League Baseball, and a sports arena in Miami, were the major sponsors of FTX.
Mercedes stated that from this weekend, FTX would no longer be a part of their racing vehicles.
Therefore, to step back high into the market, crypto traders need to re-evaluate their assets and plan their way forward. After all, stepping down from being a multi-millionaire to bankrupt in just a matter of days is enough to tremble other potential investors.
The Final Word
Cryptocurrencies are known to be volatile, and there is always a certain degree of risk associated with investing in them. You could either upgrade your wallet with millions of dollars within days or go bankrupt in an instant.
However, planning is the key to success. Not every investment goes in vain. Therefore, studying the nature of blockchain and the future value of virtual currencies can pave the way forward for fruitful investments.
