FTX, once considered a crypto giant, is now the latest to crash and burn in the market. it follows discoveries about its high-risk infrastructure. The CTFC recommended that FTX rescind its pending application because of a flawed system only harming investors. Even if the application would push through, it would likely receive the CTFC’s denial.
A Flimsy Structure
FTX was a fast-growing international exchange that threatened to reach the height of Binance at one point. It became one of the most visible brands in crypto following its purchase of the American Airlines Arena in Miami, renaming it to the FTX arena. Much of the speculation led to a stark increase in the value of the exchange’s native token.
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The problem lay on its token. FTX tried to back most of its assets based on the value of its growing cryptocurrency. Other exchanges have cash backing and insurance protecting their assets to provide more security. When the inevitable bear market came for crypto, the FTX’s FTT token crashed. Investors scrambled to try and salvage what little money they had left.
Investigators discovered that FTX’s research arm Alameda did not have any other assets backing its investments. The company also relied on the value of its token to provide funding for the companies under its umbrella. It resulted in a cascade of downturns that affected the entire market overall.
A Cry for Help
Binance founder Changpeng Zhao or CZ announced on Twitter that he would be willing to acquire FTX. Its founder Sam Bankman-Fried reached out due to a liquidity crunch. In essence, FTX needs money to resolve some of its current obligations, and selling is the best way to do that. CZ stated that they intend to acquire FTX but will conduct a full investigation in the coming days.
It is an unusual move, considering that FTX and Binance’s relationship did not end well. In 2021, Binance stopped its users from acquiring FTT tokens because they felt people did not understand its purpose. Following further investigation, CZ announced they would remove the token from their platform.
It looks like these revelations were made clear as CZ also delved deeper into detail, showing that FTX proved too high-risk of an asset at the time. They seem interested in acquiring FTX because of valuable cryptocurrencies and partnerships.
There’s also the case where Binance can grow if it can use the working parts of FTX, like its established partnerships with banks and other countries. While this means the downfall of FTX, it also further solidifies Binance as the top international exchange in the world.
Traders who began shorting FTX after the news broke out found themselves in a lot of profit, while investors faltered. It seems that this news may also serve to become another foundation block for strengthening Binance’s token BNB.
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