The 8 billion dollar crunch by FTX reveals a dog-eat dog cryptosphere

The path from the hero to zero point can be quick and brutal, as Sam Bankman-Fried can confirm. The 30-year-old boss of FTX, who sought to buy Goldman Sachs last year, saw this week how his assets of $ 24 billion collapsed on paper when his crypto exchange suffered a liquidity bottleneck of $ 8 billion. SBF marketed itself as the friendly face of crypto, which-at least superficially-worked with the supervisory authorities and attracted prominent and blue chip investors. The fall of his empire leaves a cryptic sphere that should treat ordinary investors, supervisory authorities and politicians with caution.

The sufferings of SBF began on November 2, when Coindesk revealed that his hedge fund, Alameda Research, was full of token, that FTX prints out of nowhere, ftt. Of $ 14.6 billion of Alameda's assets of $ $ 6 billion, $ 2.2 billion were pledged as security for loans. Four days later, the arch -rival from FTX said Binance that he would sell his FTT worth $ 580 million in view of the revelations. This frightened the customers who deducted up to $ 6 billion from FTX within three days and reduced the value of FTT from 22 USD to $ 5. FTX appealed to Binance on Tuesday to save it. To a surprise for no one ended binance less than two days later, citing inquiries from US securities and futures guards to FTX and supposedly improper handling of customer money. FTX continues to find other white knights.

his hardship leaves many questions, not least, like a stock exchange that was estimated at $ 32 billion in January, a liquidity crisis was able to suffer from the right administration. One view is that if a project is based on a little more than the theory of the larger fool, completely apart from an apparent circulatory bill, sooner or later the facade collapses. In April, SBF “Yield Farming”-a complex crypto loan practice that offers FTX-compared with a box whose value is determined by the willingness of others, more dollars, and prompted his Bloomberg interviewer to assume that this sounded very much according to a snowball system.

It is crucial that FTX customers are now blocked by their accounts. Equity investors, some of whom should have clearly known - including the Ontario Teachers' Pension Plan, Softbank and Blackrock - are expressly not the top priority of SBF. It is shocking the second time this year after Celsius Network's bankruptcy that a Canadian pension fund was burned after a bad crypto bet. Pension funds have no business to invest their retirement provision of their customers in such a volatile market as crypto.

The Saga leaves Changpeng "CZ" Zhao von Binance as a top dog with the world's largest crypto exchange. CZ claimed when he sold FTT: "We will not support people who do lobbying against other industry players behind their back." SBF later turned to a "special sparring partner" on Twitter: "Well played, you won."

The position of Binance should worry about wax dogs and legislators, both in view of its sheer size with more than 28 million users and his arduous attitude towards regulations. It has designed itself to be everywhere and yet anywhere. The U.S. Ministry of Justice is investigating money laundering rollers; Reuters reported this week that Binance has processed transactions worth $ 8 billion for Iranian companies since 2018.

Despite the importance of the stock exchanges as a bridge between crypto and fiat currencies and despite other crypto implosions this year, there is still no effective regulation. That urgently has to change.

cz has thought exactly that FTX contains important lessons, including the use of a token you created as security. He is also right with his forecast that the dominance of Binance will have a stronger official control. It is necessary, but will only be done if guard dogs are authorized to monitor a financial area that is currently causing unnecessary devastation.