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FTX was the third largest cryptocurrency exchange in the world. It is said to be in the midst of a liquidity crisis and is subject to a potential acquisition by Binance.
FTX was the third largest cryptocurrency exchange in the world. It is said to be in the midst of a liquidity crisis and is subject to a potential acquisition by Binance.
It was reported by Coindesk on November 2 that Alameda Research, one of the largest market makers in the space and the hedge fund closely linked to Sam Bankman-Fried, FTX’s founder, had an extremely concerning $6bn hole which was backed only by FTT, FTX’s own native token. This news was subsequently confirmed by Alameda’s CEO a few days later.
After CZ’s tweet that Binance had liquidated a sizeable amount of FTT due to recent revelations about FTX, the market witnessed a heavy run on FTX leading the company to halt all withdrawals and seek capital to plug its liquidity hole.For so many participants whose assets are still held in FTX, this is completely devastating and the contagion risk, at this stage, is immeasurably painful.
While we are still waiting to understand the full implication of these fast evolving events with FTX, one thing that is clear is this is yet another classic example of the big problem in the cryptocurrency world where custodianship and liquidity are concentrated and fragmented. While Binance’s attempt to acquire the now insolvent FTX and Alameda Research would save the industry from more pain, the problem of fragmented and concentrated liquidity in our industry has become even greater.
Naturally we extend our thoughts to all those affected by this collapse.
In times of market capitulation, such as yesterday, I like to spend time to filter out the noise and drama and critically think things through – the question I like to ask is whether we, at FLUID, are really building the right thing in these times and whether our general direction of travel is the right one?
My take is:
Onwards and upwards.