SBF-FTX scandal and its impact on the larger crypto market

By now we all know about the FTX scandal that has been all over the news. FTX had been shilling cash to every possible sphere. Be it gaming teams and tournaments, NBA teams, chess tournaments, political donations, or charity work, It felt like FTX had an infinite supply of funds. FTX had become the 2nd highest donator to the democratic party in the US.

FTX and its subsidiaries were almost invincible in the past year. While having lesser users than its competition like Binance, it did feel like they were doing something right. But like all fraudulent models, the truth always comes out and the suffering ensues. FTX had been over-leveraging its deposits from users, to promote its flashy image and generosity.

FTX filed for bankruptcy on November 11, 2022, stating liquidity issues.

How bad was the FTX scandal?

FTX had only 1 BN in assets and over 9 billion dollars in liabilities. There are still rumors and foul acts by the company which say over 10 billion dollars of user funds were secretly transferred out by Sam Bankman himself.

With this debacle on hand, and the company not being able to come up with the deficit. On November 9th, 2022, FTX claimed that they're were worldwide outages on its site. Which quickly grew, when users realized that they could no longer withdraw their deposited funds. Anger blew on the streets and FTX had to come out with the truth.

A rumored total of 16 billion dollars is the worth of this scandal. 16 billion dollars wiped out. 

How is it affecting the larger crypto market?

Well, when there is an issue of this magnitude, there are always repercussions to the entire sphere, and users now vary about depositing money.

Bitcoin

The gold standard of crypto has seen some variance following this scandal. but how bad is it really?

On November 8th before the crash, it was worth about 1 bitcoin = USD 20,000 (roughly), after the news spread and user realized their losses, bitcoin fell to USD 16,000 on November 10th. Since then it has again gained in value and is worth about USD 17,000. 

In a market cap calculation, 57 billion dollars have been lost, with the current market cap equal to USD 317 Billion.

This may sound like a lot, but if you have been following crypto for any amount of time, this sort of variation is really not surprising.

Bitcoin can easily recover and probably will be back to USD 20,000 in a couple of months.

  (data from Coinmarketcap.com)  

Ethereum

The innovative and technical heavy blockchain has also been affected. Here are the numbers

1eth = 

November 8th, 2022 (before the crash) - USD 1500 (roughly)

November 10th, 2022 (lowest point) - USD 1100 (roughly)

November 16th, 2022 ( a week after the crash) - USD 1260  (roughly)

Value lost ~ 19%

  (data from Coinmarketcap.com)  

Polygon

A very popular level 2 solution for Ethereum, that scales up ether5eum and reduces gas fees. If you want to learn about this blockchain read here.

1 Matic = 

November 8th, 2022 (before the crash) - USD 1.15 (roughly)

November 10th, 2022 (lowest point) - USD 0.81(roughly)

November 16th, 2022 ( a week after the crash) - USD 0.95(roughly)

Value lost ~ 21%

(data from Coinmarketcap.com)

Solana

An increasingly popular blockchain that gained popularity thanks to its technical achievements like high rates of transactions and very low gas fees.

November 8th, 2022 (before the crash) - USD 32.1 (roughly)

November 10th, 2022 (lowest point) - USD 12.62(roughly)

November 16th, 2022 ( a week after the crash) - USD 14.48(roughly)

Value lost ~ 54%

Solana has been really affected by this particular news.

 (data from Coinmarketcap.com)  

Why have I chosen only these 4 tokens

While there 100s of coins and tokens in the crypto industry, currently only these coins are considered the work-horses of cryptocurrencies. All of them provide something new in the ecosystem, and most projects and tokens are based on them.

Inference

This is not financial advice, and you must not take it as such. There is no denying that cryptocurrencies have lost value because of this incident.  But, when the faintly cleared, crypto still held value.

Inferring from a technical standpoint of projects and apps, There still remains an enormous opportunity in crypto, and crashes like these don't affect the viability of its future. It is simply not an existential threat to the main coins, and it is something that they can digest.

Conclusion

By providing real numbers across multiple coins and time frames, we can understand the depth of the issue crisis. We can also understand how certain coins have fared against others. This sort of crisis is not an existential issue for crypto, But regulation is necessary.

With Regulation, such incidents can be easily stopped. No one would lose money and it would be a smooth ride for crypto. Like every other entity in the crypto-space calling for regulation is necessary, especially in the liquidity holding.