The crypto market continues to suffer massive losses due to FTX filing bankruptcy after locking customers from withdrawals. The news of one of the largest exchanges in operation crumbling has sent shockwaves reverberating through the market with most projects taking major losses. Here’s what is known regarding FTX and how you can protect your wealth during this downturn.
High Profile Losses
Notably, the FTX crash can be considered the highest-profile collapses seen in a couple of years. The platform was massive and had recently been valued at $32 billion in January 2022. Despite its excellent valuation, behind the scenes, FTX was falling apart. Sadly, all of this behind-the-scenes chaos is just now coming to light as the exchange appears to be short billions of dollars on its balance sheet.
The revelations began to surface after the platform spooked its users which caused a run. Suddenly, a flood of clients sought to withdraw their crypto from the exchange in a hurry. This run and subsequent collapse have many analysts calling this crypto’s “Lehman moment”. The reference is meant to correlate the size and effects of such a massive failure across the market.
Cryptocurrency Exchange
FTX wasn’t a small fish in the crypto ocean by any means. The exchange was ranked fourth in the entire sector in terms of daily trading volume. Additionally, it was backed by some heavy hitters in the market including BlackRock and Sequoia Capital.
FTX Exchange
FTX has been a major player in the crypto market ever since it entered service in 2017. The network found instant success due to its notable developers and backing. Additionally, the system was packed with helpful features that improved the trading experience.
FTX was founded by Bankman-Fried and Gary Wang. Bankman-Fried was a recognizable figure in the market for many reasons. This 30-year-old entrepreneur now finds himself under the magnifying glass as multiple regulatory agencies are investigating his company for misuse of clients’ funds.
Despite the heat, when asked about the bankruptcy filing he stated “I was shocked to see things unravel the way they did earlier this week.” His firm is now short billions in client funding with more losses and hacks coming to light since the filing. Here’s what the bankruptcy filing has shown so far.
Bankruptcy
Earlier this week FTX’s CEO and founder resigned amid a flurry of allegations. The platform then handed control to John J. Ray III. He is a well-known corporate bankruptcy attorney. Notably, he has handled other high-profile bankruptcies including the Enron Corp fiasco.
According to the filing this week, FTX has a massive $8bn deficit on its balance sheet. Additionally, further investigation shows that there are still around $1 billion in customer funds that are unable to be located. It’s these missing funds that have regulators pulling out the magnifying glasses with many accusing Bankman-Fried of using clients’ funds to fund other projects and his lavish lifestyle.
In light of the sheer size of the losses, the Bahamas Securities Commission announced that it has begun a criminal investigation to unearth any potential misconduct on the part of FTX staff. This task falls on the Bahamian government as FTX moved its headquarters from Hong Kong. It’s this move that has some wondering if there was a long-term maneuver at play here.
Let’s Look at the Facts
When you break down the sequence of events that led to this collapse, some contributing factors shouldn’t be ignored. For one, there is a pattern of bad accounting practices that helped FTX officials spend and lend funds without oversight or community knowledge.
According to company revelations, the developers built special back doors into the operating system to enable executives to transfer funds without raising any attention from the community. Now, the platform claims that anywhere from $1-2B in funding has disappeared.
Bad Loans
One of the main reasons why FTX is now down for the count is bad lending practices. It’s becoming all too common to see crypto exchanges take clients’ funding and use it to bolster other projects without consent. In these instances, FTX used its Alameda Hedge Fund to lend billions of dollars to other startups. Specifically, reports show that around $10 billion in funds migrated from FTX to Alameda over the last couple of years.
Stolen Funds
Another loss has come to light over the last few days as developers now claim a hacker made off with $473 million in crypto assets. The firm’s CEO, John Ray, took to social media to confirm the attack, losses, and remedies. In a public statement, he said that the firm took “precautionary steps” once they notice the attack which led to the discovery of multiple unauthorized transactions.
Notably, the developers have patched the attack vector to prevent further losses. Additionally, the platform moved these funds to cold storage. Cold storage is the best option for saving crypto because it keeps your holdings offline. Most crypto exchanges leverage a combination of cold wallets and multi-sig wallets to prevent unauthorized withdrawals.
FTT
Another issue that led to FTXs demise that can’t be overlooked is its use of FTT tokens to bolster its balance sheet. It’s becoming an issue for exchanges to use their tokens as part of their reserves. The main complication is that the value of these tokens is that they can drop very quickly upon any negative revelations regarding the exchange. As such, networks that use this accounting structure are subject to massive losses when issues come to light.
Binance Was Set To Rescue
The world’s largest CEX (Centralized Exchange) by trading volume, Binance, was set to step in and bail out FTX. The agreement was posted by FTX as a way to calm the nerve of its anxious clientele. However, the rescue deal fell through after Binance’s CEO revealed that his company’s due diligence report showed unexplained missing funds. Interestingly, Binance has said it intends to use the funds intended for FTX’s bailout to help bolster other projects that are affected by the fallout of the bankruptcy.
Domino Effect
The sheer size of FTX and its integral part within the crypto market has led to a massive domino effect throughout the market. Nearly all top perfuming coins have seen massive losses. Projects like Bitcoin and Ethereum have seen +20% losses in value. Other sectors, like DeFi, have been hit even harder by the news.
FOMO and Bad Media
The combination of a steady decline in crypto values over the last year and the sudden collapse of multiple high-level projects have led to a slew of bad media coverage. The media has used this incident to paint cryptocurrencies as the enemy and unsafe. These allegations are despite the fact that all experienced crypto traders tell users to not leave their crypto on exchanges or use non-custodial options.
Bad crypto press isn’t good for the community for many reasons. For one, it can lead to miss trust in the technology even though it is more transparent and responsive than centralized systems. Additionally, it fuels anti-crypto sentiment by empowering those who want to keep the centralized financial system as the only option. Lastly, it can lead to heavy regulations.
Global Regulators
When crypto traders lose their entire portfolio, the reverberations from the pain are echoed through to regulators’ ears. As such, the massive amount of missing funds and overall circumstances behind the FTX crash are sure to lead to more scrutiny for all crypto platforms.
The main problem with this approach is that politicians don’t understand the key differences between cryptocurrencies and centralized financial assets. As such, they often overstep their bounds and create technologically restricting laws that nullify the benefits of using these systems.
Other Exchanges Losing
The FTX crash has also caused other major platforms to shutter a bit. Recently, it was revealed that another major contender in the CEX market, Crypto.com had made a major mix-up this year. According to the company documents, the error occurred when they accidentally sent $400M in ETH to a competitor’s wallet.
Luckily, the funding was promptly returned but not before news of the mix-up went viral. The circumstances surrounding the miss transaction led to a flood of clients seeking to withdraw funds from the exchange. Notably, Crypto.com has +70M users currently. However, the CEO pointed out that they don’t lend out clients funding which makes the platform more transparent.
META 1 Coin Remains Stable During the Storm
One project that continues to shine even in the darkest of crypto winters is META 1 Coin. This unique safehaven token has managed to retain stability and even grow in value since the start of the year. Projects like BTC are down 65% from their all-time highs with many predicting a fall to lower levels, while META 1 continues to slowly appreciate.
How Can META 1 Coin Remain Stable During this Crash
One of the first things to understand about META 1 is that its value is decoupled from the rest of the crypto market. The token derives value from a diverse basket of gold-related assets. The use of gold-related assets is crucial to the token’s self-appreciating formula.
Gold has been proven to be a solid store of value. The precious metal is agnostic, meaning no nation controls its full supply. Additionally, gold sees growing demand during times of network uncertainty. The main downsides of gold include that it’s not practical for the digital economy and it’s way too expensive to store, transport, or even mold.
META 1 Coin Combines the Best Aspects of Gold with Blockchain Assets
META 1 Coin takes the self-appreciating characteristics of gold and combines them with the ease of use and efficiency of blockchain assets. This strategy is better than pegging the token to fiat currency for many reasons. For one, it eliminates inflation.
Turn on the news and every channel mentions inflation and the damage it’s doing. You don’t need a TV to see prices are on the rise. Everything from food to fuel has risen sharply this year. This loss of buying power is a saver’s worst enemy as it robs them of their future.
META 1 Coin holders enjoy the same store of value characteristics as gold but with more access and transparency. Unlike gold or paper gold, META 1 Coin holders have custody of their tokens directly. Only you have access to your holdings. Even the developers have no way to access your wallet without your private keys.
It’s About the Added Protections
META 1 outshines its predecessors through the use of special smart contracts. These systems were built to protect decentralization and the token’s stability. The first step to this equation was ensuring that META 1 remains a community-led project.
No Corporations
To accomplish this task, the developers decided to ban all corporations from holding the token. This approach prevents trading firms and hedge funds from entering the ecosystem and taking control using sheer force. All META 1 Coin holders are individuals seeking finical freedom. This structure falls in line with the project’s founders’ dream of providing people with a fair and more efficient financial system.
Prevent Dumps
A dump is a coordinated selling of a project’s tokens by a massive trader or a group of token holders. When a dump occurs, the value of a token can be obliterated in minutes. These trading practices are most commonly associated with whale traders as you need to hold a significant amount of the asset in question to accomplish your goal.
META 1 Coin users remain protected from dumps thanks to the network’s minimum trade value system. This mechanism ensures that all trades meet the minimum asset value of the token. To accomplish this task, all trades must get approval from an off-chain sensor called an oracle. The main advantage of this strategy is added stability and a more cohesive community.
Grab the Low Hanging Fruit
One of the best ways to protect your wealth is to use a high-yield savings account. The META VAULT offers users 10% APY on their holdings. These payouts are paid in META 1 Coins so you can enjoy compounding returns to provide even further profits.
FTX has Fallen – You Don’t Have to Be Next
Whenever there is a massive exchange hack or bankruptcy in the crypto market the effects are felt throughout the industry. Sadly, FTX was too large to not take a few others down when it collapsed. However, you don’t have to be one of those casualties. Integrate safehaven assets like META 1 Coin and prevent further losses now.