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The crypto market has faced massive changes in the last twelve months. Due to the FTX collapse, the valuation of many crypto coins decreased. Bitcoin, Ethereum, and Litecoin are just some cryptocurrencies where many investors have lost thousands of pounds on their investments.
Although the FTX collapse happened in November 2022, the crypto market is suffering the effects four months later. The question is, how did the FTX collapse happen and why did it affect the crypto market so much? Let’s take a further look!
What Happened To The FTX Exchange?
If you don’t know what the FTX Exchange is, we will explain. This cryptocurrency company was founded in 2019 and quickly rose to the top. They had a highly successful three years and the value of the company increased dramatically. Soon, they become one of the most successful crypto companies in the world.
Despite the valuation of this company, it only took ten days for the FTX to collapse. It all started with a report that CoinDesk published. They are a crypto news site and revealed that the sister company of FTX Exchange, Alameda Research, held a position of $5 billion of the native token of FTX.
Due to the high position the company held, it raised massive concerns regarding the crypto exchange company. Not only did people start to question FTX but they also raised questions about other crypto companies and were concerned about the legitimacy of the whole crypto world.
Timeline Of The FTX Collapse
Starting on November 6th 2022, Binance sold all of their FTT tokens which were valued at $529 million. The reason was given by the Binance CEO, Changpeng Zhao and he said the decision was based on risk management after the collapse of the Terra crypto token.
November 7th – The following day, the FTX said they were experiencing a liquidity crisis. Nonetheless, Bankman-Fried attempted to reassure those who invested in the company. Despite trying to reassure investors, he soon stepped down as CEO of FTX. No longer than two days later, the value of the FTX Exchange token dropped by more than 80%.
On November 8th, Binance reached a nonbinding agreement to buy FTX’s non-US business. This meant Binance was bailing out its close competitor to save the crypto market.
November 9th – Although Binance promised to rescue FTX, this promise did not last long. The company pulled out of the investment on the FTX following the due diligence they completed on FTX, believing they were misusing the customer’s funds.
November 10th – Bahamas authorities froze the assets that were in their banks of the FTX after Bankman-Fried was looking for $8 billion to bail out his company. That same day, the California Department of Financial Protection and Innovation initiated an investigation into Bankman-Fried’s company, FTX.
November 16th – Fast-forwarding six days, a lawsuit was filed against FTX. The collapse was now at full flow and there was nothing to be done that could keep the company afloat. The issue with this is the doubt that it caused on the market.
The Florida federal court accused Bankman-Fried of creating a fraudulent cryptocurrency scheme that took advantage of thousands of people in the US. They also accused many celebrities involved such as Shaquille O’Neal, Steph Curry, Naomi Osaka, Shohei Ohtani, Levin O-Leary and Larry David, of allegedly helping him with the plan.
Bankman-Fried Charges
Bahamian authorities arrested Bankman-Fired on December 12th and put him in jail for multiple fraud charges. It has gone down as one of the largest financial crimes in the history of the United States.
Not long after, Bankman-Fried was extradited to the US. However, after a court hearing on December 22, a judge decided to release the former CEO of FTX. They agreed to a 250 million dollar bond to his name and had to be confined in the North California area, wearing an electronic bracelet which monitored his movements. This bond was the largest in America’s history.
How Has It Affected The Cryptocurrency Market?
As all of this was commencing, many questions were raised about the legitimacy of other companies in the crypto market. This led to many investors questioning the cryptocurrency coins that were
Despite the millions of dollars that were lost, the crypto market is still going and in fact, raised governing bodies to get involved with the crypto market. The value of Bitcoin and Ethereum and many more has not retained its valuation before all of this. Nonetheless, finance experts believe that there is every chance the market will maintain its position.
This change in the market is good. There will be more regulatory bodies getting involved with the market and implementing more rules and regulations. Kevin Werbach said that “it will light a fire” for the crypto market, allowing policymakers to design a more stable structure for the market.
Kevin Werbach continued to say that the rules developed will reduce the funds being transferred overseas, similar to what Bankman-Fried was attempting to bail out his company in the United States.
Although many people think the crypto market is completely unregulated, there isn’t a regulatory structure behind digital currencies. For things to improve, something must occur and the FTX collapse was exactly that. People were made aware of how unregulated the market was and are now looking to improve it.
Can We Expect A Return On The Crypto Giants?
In December, Bitcoin dropped massively, with it being valued at just below 16,000 dollars. Nonetheless, investors who have been in the market for several years have said this has happened before. They said that the market experienced a drop in valuation similar in 2018. It then increased in value shortly after the winter of 2018 and reached new heights.
The crypto market is split between bearish and bullish views. The reason why people are bullish about this is that it has happened a couple of times with digital currency. Not to mention that the next halving event for Bitcoin is only around the corner, expected in early 2024.
What To Do If The FTX Collapse Affected You
If you are an investor in the crypto market, you may have been affected by this. Luckily, there are companies out there that recover your losses. They might be able to return some of it, if not all of it.
Some investors are part-time investors so it would not affect them massively however, some people do this full-time. If you are a full-time investor, this would have impacted you massively and could have caused you financial trouble. Try to get some of your investments back but, if it caused you to get in debt since the collapse, you should consider IVA advice. They will be able to help you manage your debt and secure a steady income to pay off those debts without struggling too much financially.