FTX Collapse: The Crypto Industry's Lehman Brothers Moment
FTX's collapse came as a surprise to many, but as more and more information comes in, it looks like the FTX's liquidity crunch started earlier than many thought.
Analysis
The world's third-largest cryptocurrency exchange, FTX, started the year with a $400 million Series C funding round, bringing its valuation to over $32 billion. Ten months later, the crypto exchange is considering the possibility of bankruptcy after its takeover bid by Binance failed.
FTX was considered one of the biggest global players in crypto, as it established itself with several brand and consumer sponsorship partnerships and billions in fundraising. The crypto exchange's finances have never been in question, given that it bailed out several loan companies during the crypto contagion in the second quarter of 2022. However, things took a wild turn in the during the second week of November.
It all started with a report on Alameda Research's illiquid FTX token (FTT) holdings and FTT's market capitalization gap. The liquid market capitalization of FTT tokens was approximately $3.35 billion, while Alameda held approximately $5.5 billion of FTT as collateral and debt leverage.
The report was followed by Binance CEO Changpeng Zhao, who took to Twitter to announce that they are liquidating all their FTT holdings that the exchange received as part of its exit from FTX capital the last year. Binance received approximately $2.1 billion cash equivalent in Binance USD (BUSD) and FTT. However, more than the liquidations, it was the wording of Zhao's tweet that caught the eye. He said they don't support people who "lobby other industry players behind their backs".
The liquidation of our TTF is just a post-exit risk management, learning from LUNA. We've been supportive before, but we won't pretend to have sex after the divorce. We are against no one. But we won't support people who lobby against other industry players behind their backs. Forward.
— CZ Binance (@cz_binance) November 6, 2022Zhao is cunning...
FTX's collapse came as a surprise to many, but as more and more information comes in, it looks like the FTX's liquidity crunch started earlier than many thought.
Analysis
The world's third-largest cryptocurrency exchange, FTX, started the year with a $400 million Series C funding round, bringing its valuation to over $32 billion. Ten months later, the crypto exchange is considering the possibility of bankruptcy after its takeover bid by Binance failed.
FTX was considered one of the biggest global players in crypto, as it established itself with several brand and consumer sponsorship partnerships and billions in fundraising. The crypto exchange's finances have never been in question, given that it bailed out several loan companies during the crypto contagion in the second quarter of 2022. However, things took a wild turn in the during the second week of November.
It all started with a report on Alameda Research's illiquid FTX token (FTT) holdings and FTT's market capitalization gap. The liquid market capitalization of FTT tokens was approximately $3.35 billion, while Alameda held approximately $5.5 billion of FTT as collateral and debt leverage.
The report was followed by Binance CEO Changpeng Zhao, who took to Twitter to announce that they are liquidating all their FTT holdings that the exchange received as part of its exit from FTX capital the last year. Binance received approximately $2.1 billion cash equivalent in Binance USD (BUSD) and FTT. However, more than the liquidations, it was the wording of Zhao's tweet that caught the eye. He said they don't support people who "lobby other industry players behind their backs".
The liquidation of our TTF is just a post-exit risk management, learning from LUNA. We've been supportive before, but we won't pretend to have sex after the divorce. We are against no one. But we won't support people who lobby against other industry players behind their backs. Forward.
— CZ Binance (@cz_binance) November 6, 2022Zhao is cunning...
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