- The crypto exchange platform FTX, once renowned as a possible crypto exchange that rivalled the likes of Binance, has now taken a nose dive as its prices plummet
- Zhao, Binance CEO, stated that the sudden liquidity crunch at FTX would attract greater scrutiny of the crypto exchange for regulators if FTX completely shut down the reputation of Bitcoin and other digital assets such as NFTs
- Binance announced its intentions to acquire and assimilate an FTX after Sam Bankman Tied sought help from its all-time value
What most individuals need to understand is the prospect of crypto volatility. It does not affect individual digital assets but rather the entire crypto ecosystem. If a significant crypto coin like Bitcoin or Ethereum experiences some considerable boost, it will cause a ripple effect increasing the prices of other digital currencies. Likewise, its opposite is also true.
FTX trading Ltd has proven this fact as its recent plunge has affected the crypto ecosystem negatively. Fortunately, Binance, a rival company, came to its rescue.
FTX steady fall
The crypto exchange platform FTX was once renowned as a possible crypto exchange that rivalled the likes of Binance has now taken a nose dive as its prices plummet. At the beginning of the year, FTX was valued at $32 billion. Together with blue-chip investors, including BlackRock and Soft Bank, backing the crypto exchange platform.
The year started favouring the cryptosystem but, unfortunately, did not last. FTX token has lost over 75% in value, and everyone else is affected due to its influence within the crypto ecosystem. Bitcoin has recorded an all-new low at $16,771.60 at the time of writing, its lowest level since November 2020.
The Ethereum network is not exempt from this effect. Ether has also recorded a new low of $1159.42, almost 20% below its original price.
The effect of crypto coins has created a butterfly effect throughout the entire crypto ecosystem; smaller altcoins suffer the most.
Alameda, a trading company, owned by FTX, has suffered significant losses by dropping by 31.38%. This considerable loss’s effects are slowly creating cracks within the crypto ecosystem. This sudden drop in value came after agreeing with Binance on allying or forming a merge form how. The initial deal affected only those within the FTX and Binance that used non-US assets.
What is the root cause
Many experts claim that the decline is due to FTX’s opaque nature and functioning. Its various operations have brought in many suspicions and are not a beneficial factor, especially within the crypto ecosystem. The issues faced by FTX were further accelerated when Zhao, Binance CEO, stated that the company still had plans to sell down more hat $500 million worth of FTX’s digital token.
A sum that is generally minute compared to its average daily trading. As a result of its operation, the sceptics around Bitcoin and other digital assets are growing, and more and more regulators are now turning their eye to cryptocurrency.
Binance Jumps in to save FTX
The effects of the FTX plunge are felt throughout the entire crypto network, and prices are significantly reducing. Zhao Binance, the CEO, stated that the sudden liquidity crunch at FTX would attract greater scrutiny of the crypto exchange for regulators if FTX completely shut down the reputation of Bitcoin and other digital assets such as NFTs.
Binance announced its intentions to acquire and assimilate an FTX after Sam Bankman Fried sought help from its all-time value. Despite the sense of Binance, they have still liquidated its FTT holdings and are attributed as a post-exit risk strategy in the event FTX completely nose-dives.
Since this new move is less than 24 hours old, Zhao still determines its intent to “save ” FTX. Although due diligence will prevail as Binance teams crack down on estimating just how big of a problem FTX has. To warn, Zhao tweeted, “Don’t use the tokens you create as collateral, don’t borrow if you’re running a crypto business. Don’t use capital efficiently, Simply have big reserves”.
What is an apparent jab towards FTX CEO holds some truth. Over the few months, many thought it would survive most of its milestones, but the more it kept pushing, the deeper its pockets grew.
The crypto ecosystem has received a significant blow to its progress, and many crypto traders have dropped out. As the year draws to an end, multiple factors are slowing down crypto’s progress. From the crypto winter and now to Bitcoins’ most significant loss, progress appears bleak.
However, this extensive crypto exchange has pledged to release more public evidence that they keep users’ funds in secure reserves. No one likes to deal with a suspicious company, especially in the crypto world, where everything relies on knowing who you transact with.
Transparency is a critical factor that many crypto exchanges look at. FTX thought that merely dealing with the user’s digital assets was enough, but showing them how you handle them is also essential.