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Implications for Blockchain Technology Globally

The Ftx Saga – Implications for Blockchain Technology Globally

Last Updated on March 1, 2024 by Ameer Hamza

It is no longer news that the blockchain-built cryptocurrency trading platform, FTX, declared bankruptcy on the 11th of November 2022 after word got out about its financial standing. Since the collapse of FTX, questions have circulated as to the implications for other trade platforms and stakeholders alike. In this article, we will be examining the likely repercussions of the FTX saga on blockchain technology and what we should expect in the coming years.

What is the FTX Saga

FTX, also known as Finance Exchange, is a cryptocurrency exchange and brokerage platform which was renowned for its liquidity prowess as traders could buy and sell cryptocurrencies quickly. Unfortunately, the platform has had an enormous scandal known as the FTX Saga.

The FTX Saga refers to the collapse of the Finance Exchange cryptocurrency trading platform after word got out that a crypto hedge fund, Alameda, owned by Sam Bankman Fried, FTX’s founder, had gotten billions of dollars in assets that belonged to the FTX organization. News began to surface about how the funds from the hedge were used to give a false sense of security and raise the prices of FTX.

To add more fuel to the raging fire, the CEO of Binance, Changeng Zhao, sold off all of Binance’s stake in FTT, leading other investors to do the same. Consequently, the value of FTT reached an all-time low in November. FTX customers and stakeholders began the active withdrawal of all their holdings, leading to a liquidity crisis and forcing the company to declare bankruptcy in Mid-November.

What are the Implications of the FTX Saga on Global Blockchain Technology?

Following the collapse of FTX, the cryptocurrency market has been at an all-time low, with most coins ranging lower than they have ever been, with some down by 95%. Popular currencies like Bitcoin and Ethereum have fallen by more than 15%.

More importantly, persons and organizations globally are left in a financial mess, given that they had significant investments in FTT, FTX’s official tokens. This would mean substantial consequences for the cryptocurrency ecosystem as the number of investors may dwindle significantly. One must also consider the regulatory encumbrances that may accompany the FTX Saga. The collapse of the platform has opened a can of regulatory scrutiny as regulators are now looking to implement strategic regulatory measures to what is an entirely decentralized system of blockchain technology.

Perhaps, one blow that can be considered to be permanent is the renewed lack of trust of investors in the viability of blockchains and cryptocurrencies. This saga will also definitely give critics a small victory concerning cryptocurrency.

Conclusion

The FTX Saga is more than several cryptocurrency deals gone wrong. Likewise, it is not the consequence of a deregulated system brought on by blockchain. It is simply the fruit of poor risk management, poor governance, and very low transparency. History is filled with companies like FTX that have been victims of similar predicaments. This shows that due diligence must always come first before any investment attempt.

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