The recent crypto crash has surprised many investors because most investors were expecting the crypto market to reverse. But it moved in the opposite direction and eventually broke below the previous low. Most investors are accusing FTX Token or FTT of this recent crash. And some are even blaming Binance because Binance’s CZ has also played a vital role in this controversy.
Many news outlets reported that FTX was about to file for bankruptcy due to which the price of FTX Token dropped more than 80% within three days. The news outlets have reported a few other facts that have severely damaged the investor’s confidence.
In this article, we’ll share detailed information about what happened to the FTX exchange and how it may affect the crypto market in the near future.
What is FTX Token?
FTX is the second-largest cryptocurrency exchange that provides trading opportunities with a range of advanced features. The exchange is primarily designed for users who want to enjoy advanced trading features with extremely low trading fees. There are more than 300 cryptocurrencies listed on this exchange.
However, US residents can only trade 20+ cryptocurrencies on this platform because the company has introduced a different version for the US marketplace that complies with the country’s rules and regulations. Bitcoin, Solana, Dogecoin, Ether, and Cardano are the most popular cryptocurrencies listed on this exchange.
The users can also trade a range of stocks and NFTs on this platform. FTX provides impressive discounts depending on the 30-day trading volume of the user. Similarly, the users can get a significant discount on trading fees if they’re holding more than $100 worth of FTX Token in their account.
What Happened to FTX?
FTX Token was performing very well. It even supported many businesses during the last year’s crypto crash. But the problem started when CoinDesk, a popular crypto publication, revealed a hidden fact about FTX.
The report stated that Sam Bankman-Fried, the CEO of FTX, has tried to manipulate the FTT’s price through his hedge fund Alameda Research. The report showed strong financial ties between these companies while they’re both supposed to operate separately. It appeared that the hedge fund was holding a large amount of FTT tokens.
The investors started pulling out their investments due to this report. Binance was also one of the leading FTT holders because CZ (Changpeng Zhao) had sold his stake in FTX to Sam almost a year ago. Sam completed this transaction through partial payments and he paid CZ in FTT.
On Nov 6, Binance announced that it will sell its FTT holdings because of the recent controversy which ultimately created a panic in the market. Most people started selling their FTT holdings because they didn’t want to become a victim of another crypto company’s fall. Within three days, FTX entered a liquidity crunch because it received more than $6 billion worth of withdrawal requests during this time.
At this stage, Binance announced that it was going to purchase the FTX. But they also mentioned that they could drop this offer whenever they want. Bankman-Fried also stated that it will provide an ample amount of liquidity to process the withdrawals. It again rebuilt the investor’s confidence.
But there were still rumors of conflict between Binance and FTX. Although Bankman-Fried rejected the rumors, it seems that it couldn’t satisfy most of the investors.
The reason why Binance stated that it can withdraw anytime from the deal is that the Binance team wanted to identify the flaws that may harm the business in the future. The team found a number of issues such as reports of mishandled funds, regulatory investigations, and corporate due diligence.
So, Binance announced that it’s no longer interested in buying FTX. It shattered investors’ confidence and FTT’s price again started dropping. Binance has already removed most pairs of FTT and many other exchanges are also thinking of removing it.
The recent events show that CZ/Binance was the only beneficiary of FTX’s downfall. The FTT’s fall started when Binance announced that it was going to sell its FTT tokens. Thus, they destroyed the second most popular crypto exchange without much effort.
Some experts say that CZ also shorted FTT tokens knowing that it was coming. So, chances are that CZ made huge profits with this move. However, CZ denied these claims by responding to another tweet on Twitter. He says that he never shorted FTT.
Everyone noticed that the crypto market dropped sharply after a long consolidation of almost four months. Most experts that it’s somehow associated with FTT because there are rumors that SOL may also collapse after some time because FTX holds a huge amount of SOL tokens.
Therefore, the investors became cautious about it. They saw the LUNA’s crash a few weeks ago and now they’ve lost money in FTT. If it kept going like that, the whole crypto market may collapse someday. Therefore, most investors pulled out their investments from the crypto market. Some investors still believe that strong projects like Bitcoin and Ethereum may still survive. But nobody knows exactly what’s going to happen.
FTT’s crash is a lesson for investors who are investing in different crypto projects without conducting enough research. Many news outlets already reported that there were some flaws in FTX’s financials. The recent collapse shows that the crypto market is taken over by a group of people who can easily manipulate the market situation.
So, investors need to be careful about their investments. We always share helpful information about different crypto projects to educate the investors. If you need more information about what happened to FTX, feel free to get in touch with us.