Markets plummet and investors fear what is coming. One billionaire loses everything. What can we learn from what happened yesterday?
Breaking news: Binance will not buy FTX! As it happened.
Let me tell you about a crypto billionaire that messed up bigtime. In one day, he lost 14.6 billion USD and his net worth decreased by 94 percent. In fact, he is not even a billionaire anymore. Now, the entire crypto industry is having to pick up the bill. Because of his questionable thoughts around crypto regulation, he made powerful enemies, and his monkey business may lead to criminal charges. The crypto market suffered from his activity and crypto currencies have fallen by 10–20 percent in a day.
The story of former billionaire and CEO of FTX crypto exchange, Sand Bankman-Fried, is going viral across the financial world. The gist of the story is that FTX managed to create a significant liquidity crunch as the FTX token FTT declined in value. In one day, the token fell from 25 dollars to 4,5 dollars. Sand Bankman-Fried was not able to cover the loss and was forced to sell FTX to the world’s largest crypto company Binance. Some say that Sand Bankman-Fried has himself to blame for having to sell his business to his prime competitor. The talk of the town is that this was good for the crypto industry as the owner of Binance, CZ, is likely a much better player for the health of the crypto industry. But it’s not over until the fat lady sings.
The problem is that it is likely that other crypto businesses will have to pay for Sand Bankman-Fried’s mistakes, and the crypto market will likely suffer in the short term. Afterall someone will have to pay the missing money or else… Expect major players to go bankrupt in the next couple of weeks.
No one knows, but the bottom is probably not yet in. Investors stay on the sidelines until they know what is happening. Those who are not faint-hearted and believe in the long-term success of the crypto space take the opportunity to buy when there is blood in the streets. Those who are careful wait. Who are you?
What can we learn from what happened in the crypto space yesterday?
We still need proper regulation that can protect customers, but we do not need to be protected from the industry itself. Let’s be smart. The regulators clearly need assistance in their work as the crypto industry is complex. Regulators could talk to experts such as Charles Hoskinson and Simon Dixon. They can help to create a transparent and decentralized crypto space that does not inhibit innovation.
We also need increased transparency in what crypto exchanges are doing with the money that they get from customers. Greed is a powerful source of energy, and all people clearly cannot be trusted. One idea that has been floating around is that we need a system that prove that exchanges has reserves for their holdings. Obviously!
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Have a great day! / Henrik