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The Crypto Winter Is About to Become a Crypto Ice Age
As another big player collapses, trust is being eroded
The crypto market has just witnessed “one of history’s greatest-ever destructions of wealth.”
I won’t claim to fully understand the complexities of the saga involving the FTX exchange, Alameda Research and recently dethroned Crypto Golden Boy Sam Bankman-Fried. It’s not for a lack of trying; it’s just hard to make sense of things that don’t make sense. But the essential details are as follows:
- A Coindesk report revealed Sam Bankman-Fried’s Alameda Research trading firm was heavily invested in the FTX exchange’s FTT token.
- Days later, Binance’s CEO announced he was selling his remaining holdings of FTT tokens. In other words, he was spooked by the fact a huge chunk of Alameda’s assets were tokens from its sister company. Side note: what’re the bets Binance is the next domino to fall?
- The FTT token price plunged after the news, and, as always, customers rushed to withdraw their holdings, leaving big financial holes to fill.
- Binance suggested it would come to FTX’s rescue until it looked under the covers and got a fright. With no one coming to plug the holes, almost overnight, the exchange became insolvent and has since filed for bankruptcy. Sam Bankman-Fried has resigned.
- The exchange then got hacked — totally nothing to see here — to the tune of over $450 million.
It leaves behind a wreckage. Billions of dollars up in smoke — both seasoned and retail investors are facing huge losses. Sam Bankman-Fried (who goes by SBF, which tells you everything you need to know about the man and the bro culture of the crypto world) saw his estimated fortune of $15 billion implode 94% in a single day. It might even drop further, as the token has every chance of completely collapsing.
As an isolated incident, this car crash could be written off as a costly bump in the journey to realizing crypto’s “destiny.” But it’s far from isolated; we can now add the collapse of FTX to an increasingly large…
