Will FTX Collapse Cause a Crypto Winter ?

The FTX crypto exchange, was second largest in the world, has collapsed. Binance, the largest crypto exchange, was considering buying FTX but is now unlikely to follow through.

Bitcoin (BTC) is under $17000. Ether (ETH) is below its post-Merge low of $1,160.

As of June 30, 2022, Alameda Research (sister company of FTX, both headed by Sam Bankman-Fried) balance sheet showed assets amounted to $14.6 billion. The assets were mainly FTX tokens and other crypto tokens. They also had about $8 billion in bank debt.

Owners of the FTT token get discounts on FTX trading fees, increased commissions on referrals and earn rewards. The value of FTT is maintained by FTX’s rolling program of buying back and burning tokens, a process used a third of the exchange’s trading commissions.

Bloomberg also reported on the Crypto Markets having huge losses as Binance looks like it will not follow through on the FTX deal.

If Crypto completely collapses then it would be an evaporation of what was a paper valuation of $2 trillion at the peak. This would dwarf the $68 billion Maddoff Ponzi scheme.

How much real activity is and was in Crypto? If fluffing transactions between exchanges like FTX and Voyager and Binance were ignored, then how much actual activity was there ? There were a float of about 197 million FTT (FTX tokens). This was likely about $5 billion of actual activity.

There is some real activity and value. We will find out how much and where based upon what emerges after this Crypto winter.

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