FTX was one of the largest digital currency exchanges, where people could buy and sell currencies like bitcoin. It quickly rose to international prominence and seemed unstoppable. Then, the firm filed for bankruptcy. Here’s what happened.
And it happened in a matter of days. But in the complex world of crypto, such a collapse can be hard to parse. Here’s the basics of what went down:FTX is a digital currency exchange, a platform where people could buy and sell digital assets like bitcoin, dogecoin and ether. Such platforms rose in popularity in recent years as more people looked to invest in cryptocurrencies without the hassle of dealing with the technical side of such transactions, such as setting up a crypto wallet.
The price of bitcoin, generally seen as an indicator of the broader crypto market, declined dramatically from its late 2021 heights. It now trades at around $16,000. Other crypto and token values followed suit. But things began to change earlier this month, when the balance sheet of a crypto investing firm that was also owned by Bankman-Fried, Alameda Research, wasIt showed that Alameda held a large amount of a digital currency created by FTX called FTT. And though that FTT held a certain market value, if the price were to drop, Alameda would be at risk of insolvency.FTT is a digital token created by FTX that is similar to cryptocurrencies like bitcoin.
. FTT was also less transparent than other tokens, making it hard to track just how many tokens had been created. People could buy and sell FTT, but trading was relatively limited. Other platforms also held the token.After Alameda’s balance sheet was leaked, Changpeng “CZ’’ Zhao, CEO of the crypto platform Binance, a rival of FTX, announced on Nov. 6 that his company would sell off all its FTT tokens. The price of FTT dropped sharply.
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