We all heard of Binance’s plan of buying FTX.
In case you missed it,
Watch this reel to bring yourself up to speed.
Where did FTX go wrong?
How could this company be valued at $30 billion a few months ago,
Receive billions from investors,
Generate eight figures in revenue PER DAY,
And then go bankrupt?
Well,
Step 1: FTX creates $FTT.
Step 2: Alameda buys or premises $FTT at a super low price.
Step 3: FTX pumps $FTT.
Step 4: Alameda posts $FTT back to FTX as collateral, borrowing "real" assets from FTX's customer deposits.
We then heard that Binance (the #1 exchange) has agreed to purchase FTX (the #2 exchange).
Now comes the twist.
Twist to the whole story
It was reported yesterday that,
After looking at the finances of FTX,
Binance will NOT be going forward with the deal.
To sum it up this is what happened:
Binance noticed that FTX had approximately a $10 Billion gap in its balance sheet.
Following this the FTX CEO released an apology, simply saying he “Fu**ed up”
The aftermath is chaotic, to say the least:
The FTX CEO shared today that Alameda is "winding down trading." (Alameda Research is a principal; trading firm of FTX.)
Over the following week, FTX will do everything possible to raise funds for liquidity. However, "no promises."
If FTX is unable to raise funds, it will most likely declare bankruptcy.
The websites of FTX, Alameda, and FTX Venture are all down. Withdrawals are halted, and users are unable to access their assets.
The majority of FTX's legal and compliance team has resigned.
Everything is being investigated by the SEC and the Department of Justice. Prepare for the hammer to fall.
VC investors have taken a significant hit. Sequoia has already written off their FTX stake.
Team IA’s thoughts:
Customers will now demand Proof-Of-Reserves from exchanges, and exchanges will face more regulation. In the long run, having proof of reserves will make exchanges safer. (OKX, Binance, and others have stated that they will be releasing theirs soon.)
More people will learn to self-custody their assets. Now everyone is racing to get their money off exchanges and onto hardware wallets.
You can order your Arculus wallet and get a discount using this link
MEME of the Week
That’s all for today,
Team Inspired Analyst wishes you, Jummah Mubarak!
Until then,
Team Inspired Analyst - signing off
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.