Preethi Panneer, Author at Goody Feed

Before I delve deeper into this FTX saga, let's go through some basic cryptocurrency terminology. BlockFi is a crypto lending platform which users can use to earn interest on their crypto or take out a loan using their crypto as collateral. On the other hand, FTX is a Bahamas-based cryptocurrency exchange which allows people to trade, buy or sell a variety of cryptocurrencies. Sam Bankman-Fried launched his crypto trading firm, Alameda Research, in 2017. Two years later, Bankman-Fried and his team launched FTX, a crypto exchange platform with perks like low trading fees and advanced options for traders. At its peak in 2021, FTX had over one million users and was the third largest crypto exchange by volume. What Happened to FTX? In early November, crypto publication CoinDesk released a report that found that even though Alameda Research and FTX are two separate companies, Alameda's assets were mostly tied up in FTT, a coin that FTX had invented. This brought into question FTX's liquidity. A few days later, when Changpeng Zhao, CEO of Binance (rival company of FTX) decided to liquidate roughly $530 million-worth of FTT, customers of FTX raced to pull out. I would say this is a power move by the opponent. Over six billion dollars was withdrawn over 72 hours which FTX struggled to fulfill. The value of FTT plunged 32%, but rallied once again with Bankman-Fried's announcement on 8 November that Binance would buy FTX, bailing it out. It seems more like Binance knew how to make use of the situation. On 9 November, Binance announced it was walking away from the deal, citing findings during due diligence, as well as reports of mishandled customer funds and the possibility of a federal investigation. So, they just ended up exposing FTX? Maybe they had speculations that FTX might be using customer funds in other ways. With that, Bankman saw 94% of his net worth wipe out in a single day. Bankman-Fried apologized the same day for the liquidity crisis said that "poor internal labeling" caused FTX to miscalculate leverage and liquidity leading to FTX's non-U.S. exchange having insufficient funds to meet customer demands. Well, is this actually the reason? Because a Reuter's report seems to have a different explanation. The report stated that earlier this year, Bankman-Fried transferred customer funds from FTX to Alameda without telling anyone, after Alameda was hit with a series of losses. How Does This Affect BlockFi? FTX US and BlockFi are closely tied. In July, FTX US provided the lender with a US$400 million revolving credit line, which came with an option to purchase BlockFi for $240 million. BlockFi has also given loans to now-bankrupt Alameda Research, Bloomberg reported. As of now, BlockFi is preparing to file for bankruptcy within days according to people with knowledge of the matter. The company said in a tweet that the “lack of clarity” around FTX’s current situation meant it would pause client withdrawals. It also told clients not to deposit to its wallet or interest accounts. pic.twitter.com/zNF1uP6evl — BlockFi (@BlockFi) November 11, 2022 Other Crypto Firms Affected BlockFi is not the only firm going through tough times. The lending arm of the crypto investment bank Genesis Global Trading, Genesis Global Capital, is pausing new loan originations and redemptions. If you have enough patience, you can read through the series of tweets that they posted regarding this. We recognize how challenging this past week has been due to the impact of the FTX news. At Genesis we are entirely focused on doing everything we can to serve our clients and navigate this difficult market environment. — Genesis (@GenesisTrading) November 16, 2022 The Winklevoss brothers’ Gemini exchange said it was pausing withdrawals on its interest-bearing Earn accounts as a result of Genesis’ changes. Genesis is the lending partner for that program. “We are working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible. We will provide more information in the coming days,” Gemini said, noting that the change doesn’t impact any other Gemini products and services. While many often boasted the fact that they earn a lot on crypto, not much is talked about its risks, isn't it? This is why Singapore is proposing new rules for cryptocurrency investment. You can watch this video to know more: https://www.youtube.com/watch?v99IHKYAi6x0&listPLoa9nNa48ZVVgUOs4vYirCdsJQpkbUe51 Read Also: McDonald’s Having New Items for World Cup & Screening Matches in 19 Outlets 10 Facts About Sam Bankman-Fried, the Man That Temasek Had Believed In Everything About Former Hyflux CEO Olivia Lum’s New Charges Simplified for You Bedok Bak Chor Mee Stall Went Viral As Stallowner Poses With Her Food A M’sian Said He Regretted Working in S’pore Due to ‘Toxic’ Singapore Workers Featured Image: investing.com & The Wall Street Journal