In early November 2022, one of the most significant crashes in the cryptocurrency industry occurred, entailing enormous consequences for the entire market. In this article, we will discuss in detail the collapse of the FTX exchange, the refusal of CZ to buy the platform, and finally, we will answer the most crucial question – how to buy cryptocurrency safely.
FTX Token Collapse
Due to the CoinDesk article, the use of FTX funds to cover Alameda’s loss received a lot of publicity and played a major role in the collapse of the exchange. Following this article’s release, Binance decided to get rid of FTT crypto in the public market. It caused the first wave of price drops (from $22 to $15).
Alameda asked Binance with an offer to buy back FTT tokens at a price of $22 but was refused. This caused a resonance in the community and a large capital outflow from the FTX exchange. As a result, the platform could not cope with low liquidity.
Refusal to Buy FTX
On November 10, Binance posted a tweet where it refused to buy the FTX exchange. The decision was motivated by the results of an independent evaluation of the company – due diligence and news about the way FTX uses its clients’ funds.
According to Reuters, the head of FTX and Alameda used $4 billion in the exchange’s funds, including user funds, to support Alameda. The company faced losses due to the conclusion of transactions in May and June 2022, which resulted in losses. One of the deals was a loan that amounted to $500 million. The company with which it was concluded went bankrupt a month later. It is also reported that part of the transferred funds were customer deposits.
The founder of Kraken expressed his opinion about the high probability of FTX bankruptcy, even though the exchange has potentially interesting assets. After that, people began to sell crypto FTT massively, resulting in a price drop to $1.5.
Before trusting your funds to any exchange, you need to conduct research. The site mustn’t use client funds for lending operations. One of the reliable exchanges with a good reputation is WhiteBIT, and it was not seen in scandals like that.