Some have referred to this crash as cryptocurrency’s “Lehman moment.” Investors have written off what once appeared to be the next big thing in technology due to the bankruptcy of the crypto giant FTX and the resignation of its founder, Sam Bankman-Fried. Customers are now in a precarious situation.
And it took only a few days to happen. Such a collapse, though, can be challenging to understand in the intricate world of cryptocurrency. Here are the essentials of what transpired:
FTX: What is it?
A platform where users can purchase and trade digital assets including bitcoin, dogecoin, and ether is called FTX. As more consumers sought to invest in cryptocurrencies without having to deal with the technical aspects of such transactions, such as setting up a crypto wallet, such platforms gained popularity in recent years.
How did it grow to be so large?
The 2019-founded business gained international notoriety very rapidly thanks to a number of high-profile acquisitions, aggressive marketing tactics, and inexpensive trading fees. Platforms that compete with it include Kraken, Coinbase, and Gemini.
With the promise that people could park their money in accounts and earn far greater returns than at conventional banks, even individuals who were inexperienced with the technology were seduced by FTX.
Major venture capital firms joined in and invested about $2 billion in the business.
The 30-year-old creator of FTX, Sam Bankman-Fried, rose to prominence as the face of the business and, to some, of cryptocurrency in general. FTX was difficult to miss because to celebrity endorsements and significant sports partnerships.
The first warning signs
Soon after Bankman-Fried launched FTX, the cryptocurrency market took off. Bitcoin’s price, which had previously fluctuated around $10,000, skyrocketed in 2021 and reached a high of more over $64,000. Venture capital funds poured into anything blockchain-related and digital currency-related, and crypto platforms shifted to draw users beyond the technologists and blockchain enthusiasts who had previously propelled its ascent.
From its late 2021 highs, when it was commonly considered to be a leading indicator of the larger cryptocurrency market, the price of bitcoin has fallen sharply. It currently trades for about $16,000. Following suit were other crypto and token values.