FTX disaster shakes the Crypto market

November 10, 2022
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This week has been very eventful for the cryptocurrency world, and it involves the 2 most important unicorns of the market FTX Exchange and Binance. Let's summarize the evolution of the situation by presenting the companies that were the 2 behemoths of the market until today.

Global presentation of these two unicorns

We wanted to study some data to introduce the situation today and to summarize the events of the last days

Binance, the first to arrive

Binance, based in Malta, was founded in January 2017. Then, less than 2 years later, on October 23, 2018 it obtained unicorn status, in just 3 short levies. The company has since launched no new rounds or funding rounds but still managed to reach a valuation of $8 billion in just 2 years. Its strategy, the acquisition of companies: Binance has indeed absorbed 7 companies related to the exchange sector, especially in security and wallets. According to our figures, it has also participated in a total of 25 investments in the shares of various companies such as Twitter.

FTX Exchange, the other side of the crypto coin

FTX Exhange, which is based in the Bahamas, for tax reasons like its competitor Binance, was founded 2 years later to the day, to compete with Binance on a market that offered many prospects for development. As for it, it will obtain the title of unicorn in July 2021. But this is not the most important information: the company, after 7 financing rounds, has reached a valuation of 32 billion dollars in January, which seems huge compared to Binance. It also acquired no less than 6 companies and 23 investments.

So FTX didn't seem to have anything to be ashamed of compared to Binance, at least until the beginning of November.

FTX's nightmare week

Until a few days ago, FTX was considered a solid cryptocurrency exchange platform. But how did we get to this out of control situation?

It all started about a week ago: market rumors began to circulate about the state of the company's accounts, as well as the relationship of the cryptocurrency investment fund Alameda founded by Sam Bankman-Fried just like FTX. and again on Monday, he assured: "FTX is doing well" stating thus: "that the rumors were unfounded".

Faced with the accumulation of doubts about a liquidity crisis relayed in particular by Changpeng Zhao, the boss of Binance, the many investors present for the platform have put FTX down. Faced with the concern, many investors began to withdraw their liquidity massively from the platform, causing an unprecedented shock in the crypto world.

Indeed, this was felt in the global market, with Bitcoin falling to its lowest level in 2 years and thus dropping back below a peak under $16,000 (approximately $17,500 at the time of writing). In 72 hours there was an estimated leakage of over $6 billion in withdrawals.

FTX thus found itself facing a liquidity crisis estimated at more than $8 billion, some sources estimating that this is what Sam Bankman-Fried would have asked for to relaunch his platform.

Faced with this, Binance offered to buy the platform, announcing its bankruptcy that same day, Tuesday, November 8.

But the relief was short-lived, since this morning (Thursday, November 10), Binance announced that the buyout was no longer relevant on Twitter.

Pourquoi? Binance and its manager explained it briefly: FTX's accounts would be so worrying that Binance would not want to invest, even risking to be dragged into the fall of its competitor.

Note that the platform even crashed for a few minutes on Wednesday evening, deepening an already critical situation, while withdrawals still remain blocked on the platform.

This disaster, which recalls the fall of the TerraLuna currency this summer should lead to a sharp increase in the regulation of cryptocurrencies especially in the United States.

By
Arthur
Unicorns analyst
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