The FTX turmoil has been ruling the headlines over the past few days. FTX, one of the largest crypto exchanges in the industry, suddenly sent a shockwave across the industry with a piece of devastating news indicating the collapse of the exchange.
Following these events, traders and investors went into a panic mode selling off all their FTX holdings. The announcement from Binance that they would be liquidating their FTX holdings triggered this panic in the market.
However, Binance again announced that it would acquire FTX to save all its investors. Following this, FTX is resuming withdrawals in some of its regional exchanges across different countries around the globe.
FTX Opens Doors To Regional Transactions
This Friday (11th November), FTX Japan released a small announcement on its website. In comparison, FTX’s Turkish subsidiary communicated its message via a tweet the same day. However, the subsidiary went a step forward to announce that it would convert users’ balances into a 1:10 ratio of the Turkish Lira.
Further developments occurred when the Japanese FSA ordered FTX Japan to go into a close mode on Thursday, which requires users to be allowed to close out their existing positions but not open any new ones. However, the regulator said that the exchange would keep taking on new clients while stopping withdrawals without providing a timeframe for resumption.
Given the global crypto market circumstances, the Japanese regulators said they were unaware of the company’s condition. Hence the regulators directed FTX Japan not to accept any new customers and pause business over the exchange for the time being.
The regional office of FTX, FTX Trading Ltd., in Antigua, wholly owns the regional subsidiaries, including FTX Turkey and Japan, including licenses for the FTX technology stack in return for royalties paid back to the parent company based in Antigua.
The local subsidiaries must, however, abide by local securities rules and regulations. Because of this, these subsidiaries must provide customers with a constrained selection of tokens, much like the local subsidiaries of Binance.
This compliance means local users can access payment rails, instead of using the slow and more expensive SWIFT transfers to withdraw and deposit funds.
Many traders prefer using this payment gateway to purchase stablecoins before sending them to the primary exchange to access full-featured trading. Despite all this going on in the global crypto market, it is worth noting that FTX international withdrawals were still paused as of the Asian hours of Friday.
How Did FTX Come To This Point?
The crypto market has been suffering greatly since December last year. But things went terribly for this industry at the start of 2022, with Russia invading Ukraine in late February. However, during this bearish period, FTX was the only exchange that was not impacted to a great extent.
Sam Bankman-Fried, the CEO of FTX, made many headlines during this period. In addition, Mr. Bankman-Fried earned a reputation as a savior since he bought many bankrupt crypto companies during this period.
But all of that changed when a report hit the web claiming that FTX’s subsidiary, Almeda Research had a significant proportion of FTT tokens in its asset valuation. The balance sheet of Alameda Research showed the evidence for the claim. This was a huge concern for all the stakeholders since FTX was taking many loads showing these assets.
But since these FTT tokens were part of the company’s balance sheet, liquidating them would only be possible if things went right. Unfortunately, this resulted in a complex liquidity crunch that put FTX deep waters.
FTX Has Been Continually Receiving Blows!
Another blow came when Binance, one of the most significant investors in FTX, announced that they would liquidate all their FTX holdings due to liquidity issues. Soon after this announcement from CX, Binance’s CEO, the crypto market went into a spiral, leaving investors and traders in shock and panic.
It did not take long before FTT holders began to withdraw their holdings from the exchange on a massive scale. This mass panic sell-off left a lasting impact on not just FTX but even many other cryptocurrencies in the market. Things got even worse when FTX stopped the withdrawal services, giving traders more reasons to worry.
This drama went on for some time until Binance announced that it would be acquiring FTX and helping them out in this liquidity crunch. This announcement was soon followed by another announcement from FTX CEO Sam Bankman Fried, who echoed the same sentiment about FTX being acquired by Binance. The CEO further stated that they had decided to benefit its users and the crypto industry.
However, most experts agree that this reaction from the CEO came a little too late, and the damage was already done. This was evident given that investors had lost their faith in FTX and the entire crypto industry.
But of course, the fact that Binance acquired FTX came as a relief to many who already had their assets in the FTX exchange. Further, local FTX subsidiaries opening up their withdrawal services again also plays an essential role in providing users with much-needed assurance.
What’s Next For FTX?
Of course, FTX was one of the largest crypto exchanges up until now. But the way things are going, it looks like FTX will never be able to restore its lost glory. As a result, traders and investors have lost faith in their trusted crypto exchange and would likely choose other alternatives.
However, all these dramas played out very well for Binance as FTX was one of its largest competitors in the market. With Binance now acquiring FTX, it does not have to worry about the competition while taking comfort from the fact that the largest crypto exchange has gotten even more significant.
As for investors and traders, there is nothing much they can do to make any substantial impact, but they can use FTX as they did earlier.
Considering the latest events, what’s your take on the future of the exchange and its token?