After the historic crash of the NFT market in cryptocurrencies, the platform’s native token FTX plunges 80% and drags the entire market down with it

The cryptocurrency market has been in turmoil since news broke of liquidity issues on the FTX exchange, a situation that increasingly points to a historic digital asset bubble burst. Binance, which had previously agreed to buy FTX out of bankruptcy, abruptly pulled out of the deal on Wednesday, deepening the crisis and causing cryptocurrency prices to plummet. Bitcoin fell as much as $15,682 on Wednesday, about 8%, after losing 8% the day before. Ether also fell to $1,083, down about 4% on the previous day.

The cryptocurrency market is in chaos again and the price of bitcoin has fallen over 13% this week. The cause of this week’s earthquake outage: FTX, the world’s fourth-largest cryptocurrency exchange that was once a pillar of the industry, sacrum a major crisis. Faced with a rapidly worsening cash crunch, FTX is looking for a solution to save the company and avoid bankruptcy. At the heart of the problem is the FTX platform’s native token, FTT, which has been in a massive selloff, plunging more than 80% in the past few days.

FTX’s liquidity issues have had a contagion effect across the industry, with crypto investors fearing another shockwave will hit them. Bitcoin is weathering the storm, but still has lost more than 17% in the last five days. But the big “B” has 24 hours in the “green” earning 3%. It fell to $15,682 on Wednesday morning, about 8%, after an earlier loss of 8% the day before. Analysts have reported that the fall has been much harder for altcoins, with ETH losing nearly 18% in the past five days.

Solana, a cryptocurrency backed by FTX CEO Sam Bankman-Fried, is also in freefall. Solana has lost just over 40% of its value in the past seven days. Over the last 24 hours, FTT has lost 22%. The broader crypto market is also deep in the red, down at least 20% over the past week. The total cryptocurrency market capitalization is now below $900 billion, a level last seen in late 2020. Experts predict the market is headed for a potentially more severe crash.

Indeed, FTX withdrawals began on Sunday morning, following a series of tweets from Binance CEO Changpeng Zhao. He revealed that his company would be selling its holdings of the FTT token, FTX’s native ticker, due to “revelations” about the company. Binance, which has also struggled economically in recent months, announced that it holds 23 million FTT tokens worth about $529 million. But FTX CEO Bankman-Fried said Binance was “trying to go after FTX with false rumors.” Bankman-Fried insisted that “FTX’s assets are good.”

The revelations mentioned by Zhao are most likely a reference to a report published by CoinDesk earlier this month. The report made claims about Bankman-Fried’s other venture, the trading firm Alameda Research. FTX and Alameda are two separate companies. But the report cites a “private financial document” that says most of Alameda’s balance was held in FTT tokens, issued by the exchange to offer users a discount on trading fees. This suggests that more than a third of Alameda’s $14.6 billion in assets are held in a cryptocurrency created by FTX.

If this information is true, it means that FTX and Alameda are hardly independent of each other, but also that the two companies would have very fragile foundations. However, on Tuesday, Bankman-Fried apologized in a memo to FTX staff who was not in attendance. A report on the subject revealed that the company had seen withdrawals in the order of $6 billion in the previous three days, orders of magnitude above the usual level. But Bankman-Fried didn’t stop there. The FTX boss followed up his apology in a series of tweets on November 10.

After all, I was the CEO, which meant that *I* had to make sure everything went smoothly. *At the end of the day I should have known about everything. Clearly, I have failed in this area. I’m sorry, he wrote. Earlier this week, Zhao announced that his company will potentially buy FTX in an attempt to salvage what’s left of the stock market. The deal announcement came about a week after FTX’s precarious situation became apparent. If the deal is concluded, it will lead to an unprecedented consolidation of the foreign exchange market and the sector in general.

However, if Binance pulls out, it could spell the end of FTX — the industry’s equivalent of the sudden collapse of investment bank Bear Stearns in 2008, which foreshadowed the broader financial crisis that unfolded this year. I. And against all expectations, it is this second scenario that happened. Indeed, the fall in the entire cryptocurrency market worsened on Wednesday when Zhao decided to reverse course. Zhao and his people announced that they had consulted the books of accounts of the rival exchange and that after the examination, Binance considers itself unable to save the platform.

“Following our due diligence review, as well as recent reports of mismanaged client funds and alleged US agency investigations, we have decided not to pursue the potential acquisition of FTX,” the company said in a tweet. It remains to be seen whether the cryptocurrency market crash will escalate to new market lows. In this case, the most important question would be what is the alternative solution to FTX’s liquidity crisis. Furthermore, the exchange could come to the attention of regulatory authorities given the magnitude of the impact.

The US SEC is already investigating the relationship between FTX’s US arm and Alameda Research. Regulators are said to be looking into how FTX handles user assets. The situation could also reinforce growing calls to regulate the cryptocurrency industry in the United States, Europe and elsewhere in the world. Amid the market turmoil, Sen. Cynthia Lummis (R-Wyo.), who co-sponsored a bipartisan bill on the subject, issued a statement Tuesday stressing the need for clear rules when it comes to digital assets.

Additionally, the cryptocurrency market you faced multiple crises through 2022, not to mention funding strains, due to rising interest rates and a broader market downturn that has caused investors to shy away from riskier digital assets. FTX’s liquidity issues come in the wake of the TerraUSD stablecoin fiasco, the collapse of digital asset sector hedge fund Three Arrows Capital and the recent bankruptcy of lender Celsius Network which operated in this market. all this is on top of the collapse of the non-fungible token (NFT) market.

Digital assets have cost investors hundreds of billions of dollars this year. Galaxy Digital, a blockchain company, reported in September that most profitable NFT projects are fraudulent and offer complicated property licensing, with buyers unaware of their intellectual property rights. The company explains that only one of the 25 NFT projects analyzed in the study attempted to offer buyers direct intellectual property rights to key art or content. This supports claims that NFTs are a scam.

In late September, global NFT market statistics revealed that NFT trading throughout the month returned to pre-bubble levels, with monthly volume down 97% from the January peak. Data from Dune Analytics shows it fell from $17 billion at the start of 2022 to just $466 million in September, a 15-month low. NFT market decline records part of a larger $2 trillion loss in the sector.

And you?

What is your opinion on this topic?
What do you think about the sharp drop in cryptocurrency prices?
Do you think the market will recover? Will FTX manage to avoid bankruptcy?
What do you think about the fall in bitcoin price? Can it reach the late 2021 high of $68,000 again?

See also

Poolin, the fourth largest mining platform, is suspending Bitcoin and Ether withdrawals, citing liquidity concerns, due to recent increased withdrawal requests

Cryptobank Celsius owes users $4.7 billion, but has no money to repay them, while its CEO has sold around $44 million worth of crypto Celsius since its inception.

Cryptocurrency Market Sinks Below $1 Trillion As Cryptobank Celsius Network Freezes Withdrawals It was worth over $3 trillion at the same time last year

NFT trading volumes fell 97% from their January peak, from just $17 billion to $466 million in September

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