The bankruptcy of the FTX platform causes an unprecedented earthquake in the planet of crypto-currencies. The platform is the second largest in the world in the sector and it collapsed in a few days when there was no indication of the possibility of FTX’s fall. When the platform declared itself bankrupt, the huge surprise that followed led to huge repercussions for other crypto-currencies. According to several experts, the fall of FTX swept the crypto-currency world in its path with a domino effect. This is the biggest fall ever seen in the world of crypto-currencies.
For now the reasons for this bankruptcy are still unclear, but the consequences of this collapse are for crypto-currencies what the bankruptcy in 2001 of the electricity broker Enron was for the accounting auditors (Arthur Andersen firm) and that of Lehman Brothers, and what it entailed for all banks.
This platform, which employed more than 300 people and had a reputation of being the most solid in the world, lost electronic tokens of 100,000 customers who had been deposited as capital with it. According to U.S. newspapers, FTX boss Sam Bankman-Fried invested more than half of the $16 billion in customer assets in his own Bahamas-based crypto-financial firm Alameda. The Wall Street Journal claims that Alameda, which did not hesitate to take extremely dangerous risks lost more than $10 billion from the giant FTX. And according to the British agency Reuters, at least 1 billion dollars were pulverized in the platform’s deposits.
Most scandalously, crypto-currencies are now in the crosshairs of the SEC, the US stock market watchdog, which has opened an investigation. By the way, since 1929, the US has banned speculation. This measure was further strengthened after the 2008 crisis. The fall of FTX has led the stock exchange regulators to suspect that crypto-currencies violate the US law on stock market speculation.
The first consequence of this Tsunami was the bitcoin which saw its price collapse. A few weeks ago, bitcoin fell below 16,000 US dollars, something that had never happened in two years. What happened next is well known. It is the categorical refusal of the Binance platform to come to the rescue of FTX, its competitor. Contrary to what had been announced by Binance at the very beginning of the FTX crisis, the offer to help turn around its rival, it withdrew at the last moment. The answer came in a tweet from Binance, which claimed to have abandoned the decision to acquire FTX. The platform cited reasons for an audit as well as revelations in the press about FTX’s mismanagement of client funds and the ongoing investigations mentioned above.
In this duel between the stars of crypto-currencies, it seems quite clear, according to experts that cyberspace is a borderless world and ultimately has few rules in its operation. According to Lewis Carroll, moving in this cyberspace world requires going through the looking glass and being wary of this topsy-turvy world, populated by chess boards and where you have to run very fast to stay in place. Changpeng Zhao and Sam Bankman-Fried know each other, spy on each other for a long time, and evolve in this world with practically no rules, yet they remain very visible. They are, so to speak, confirmed stars of crypto-currencies. One is CZ as he is nicknamed and he is the head of the Binance platform and the other is nicknamed SBF and the latter has just seen his FTX platform go bankrupt and his entire fortune collapse with it. The two fought an unequal battle via twitter. CZ gave up at the last minute and quickly pushed FTX into bankruptcy.
Beyond these low blows between competing businessmen whose ambition is to eradicate each other, the crypto-currencies have taken a big hit. They almost all fell in the days following the FTX bankruptcy, worsening a situation that was anything but good, not to mention worse already. The collapse of FTX will damage the image of crypto-currencies which are now suspected of fraud. On the other hand, the recent decision by the FED to raise key rates to curb inflation has had positive effects as we have seen investor confidence rise again but the crypto-currency market still remains very volatile. We will come back to this.
