Crypto thoughts after FTX implosion
The cryptocurrency market was reeling after an internal war between two of the industry’s billionaire tycoons damaged investor confidence and led to a mass breakout.
The recent drama involves crypto exchange FTX founder Sam Bankman-Fried and Binance CEO Changpeng “CZ” Zhao in a painful display of rivalry that has sent doubts reverberating throughout the industry.
The only major cryptocurrencies that have seen a gain in the last 24 hours are stablecoins such as USDT (USDT-USD) and USDC (USDC-USD).
These tokens, which should maintain parity with the dollar, actually rose slightly against the dollar (GBPUSD=X), due to a pump in their market value as investors dumped their crypto holdings and parked their value in stablecoins in an attempt to ride out the storm.
Check: Crypto live prices
Confidence in the crypto industry has taken a critical blow since the clash between FTX and Binance, and now the industry is acting like an exposed boxer hoping to hold the round.
It’s too early to tell whether crypto’s civil war is just a short-lived redress of the balance of power or a bat signal of distress that articulates that investor confidence is shattered and may never recover.
Since the drama began, the combined cryptocurrency market capitalization has fallen by over 8% in the past 24 hours to $940 billion, according to data from coingecko.
This is a significant drop from the market capitalization at the start of the week of $1.07 billion when the first shot of an internal war between two of the industry’s most prominent tycoons was fired.
Since then, the value of FTT (FTT-USD) has bled a devastating 80% in the past week to $4.62.
Crypto traders holding long positions across all blue-chip cryptocurrencies saw massive losses and questions are being raised about the safety of the crypto lending companies bailed out by FTX following the fallout from May’s Terra/Luna crash.
Read more: FTX Crash Removes Billions from Market as Binance Moves in to Buy Crypto Rival
It was on Sunday evening that the first shot of the crypto battle occurred when Binance CEO Changpeng ‘CZ’ Zhao tweeted that he would dump the exchange’s holdings of FTX’s native cryptocurrency FTT.
On Sunday, Binance’s CZ tweeted: “Liquidating our FTT is just post-exit risk management, learning from LUNA.
“We gave support before, but we will not pretend to love after divorce. We are not against anyone. But we will not support people who lobby against other industry players behind their backs. Further.”
Then, in a cheeky cynical move on Wednesday, Binance CEO Changpeng ‘CZ’ Zhao tweeted that he was not just coming to save FTX, but to “get it”.
This move came just three days after Binance said it would dump its entire holdings in FTT, causing a rout among FTX investors.
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On Tuesday Binance CEO CZ tweeted: “This afternoon, FTX asked for our help. There is a significant liquidity crisis. To protect users, we signed a non-binding LOI, with the intention of fully acquiring FTX.com and helping cover the liquidity crisis. We will conduct a fully DD in the coming days.”
Then Binance’s CZ rubbed salt in Bankman-Fried’s wounds and taught him how to run a crypto exchange.
On Wednesday CZ tweeted: “Two big lessons: 1: Never use a token you created as collateral. 2: Don’t borrow if you run a crypto business. Don’t use capital “efficiently”. Have a big reserve. Binance has never used BNB for collateral, and we have never taken on debt.”
The young man at the center of the current turmoil, Sam Bankman-Fried, is no longer a billionaire after seeing $14.6 billion of his fortune wiped out overnight.
The FTX boss has disappeared from the Bloomberg Billionaires Index after his estimated personal fortune fell nearly 94% to $991.5 million in a single day.
Paulina Jóśków, head of business development at Ramp, spoke to Yahoo Finance about the recent turmoil: “Cases like this further underscore the need for self-storage and infrastructure built to support decentralization. The near collapse of FTX also underscores the urgency to keep centralized entities, such as CEXs, responsible for any damage done in such cases. This is because they do not deliver on the promise of protecting users’ funds. In DeFi, this problem is solved by the code, we have self-custody to ensure that users are not vulnerable when those responsible are reckless.
“We’ve seen similar cases with Celcius and Three Arrows Capital, centralized, custody approaches tend to grow faster but have proven to be much less robust. Ultimately, Ramp hopes for a future where assets are self-managed using open source, auditable technologies. The ethos of decentralization remains at the core of cryptoculture, recent events involving FTX, Celsius and Three Arrows Capital are exactly why we should protect it at all costs.”
Amidst all the drama, the blue chips at the top of the cryptocurrency market are bleeding, with bitcoin (BTC-USD) down more than 10% in value over the past seven days, to a muted $18,305. Ethereum (ETH-USD) fell nearly 19% in the last the week to a low of $1.281.
See: What Would Karl Marx Think About Crypto? – The Crypto Mile episode 7
