The End of Crypto Currency? The Fall of FTX

FTX, a cryptocurrency exchange founded in 2019, was the world’s third-largest cryptocurrency exchange. On November 11, 2022, FTX filed for bankruptcy, and founder Sam Bankman-Fried stepped down as CEO.

A few months ago, Bankman-Fried was celebrated for his determination to aid struggling cryptocurrencies to keep the market running and his philanthropic efforts. Today, he is turning to Twitter to apologize for the mismanagement of his company.

What caused this collapse of his personal fortune and his company’s? A series of bad decisions. Allegedly, Bankman-Fried used his hedge fund, Alameda, to make a series of risky loans based on one of his cryptocurrencies, FTT. This close financial relationship between Alameda and FTX intertwined the two companies, ultimately leading to its downfall. Over just a few days, the fortune of Bankman-Fried went from $16 billion to zero, and the value of his company went from $32 billion to zero.

Investors and ordinary people were once highly optimistic about the future of digital currencies. However, experts in financial markets, including JP Morgan Chase CEO Jaimie Dimon, have long criticized cryptocurrency for its volatile market that is risky for investors. Cryptocurrencies such as Bitcoin and Coinbase have suffered significant losses over the last year.

Some are warning that the collapse of FTX might be the equivalent of Lehman Brothers’ collapse in 2008 to the crypto market. Whether other cryptocurrencies will collapse with FTX is yet to be seen, but the world is watching to see how the crypto market responds.