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The crypto winter is getting worse, and FTX is its latest victim.
Less than a year after it boasted a $32 billion valuation, the crypto exchange, owned by Sam Bankman-Fried, faced a „liquidity crunch“ that forced it to try to sell itself to rival Binance. After Binance walked away from the deal, citing issues „beyond our ability or control to help,“ FTX scrambled to find an infusion of cash elsewhere, but failed.
Consequently, FTX said Friday it had begun Chapter 11 bankruptcy proceedings. Bankman-Fried has also stepped down as CEO.
The fallout is wide-ranging. Contagion fears sprung up last week, fueled by reports of heavy exposure to FTX’s native token on the balance sheet for trading firm Alameda Research, also owned by Bankman-Fried. The value of the overall crypto sector dropped 12% over a day to $911 billion, according to CoinMarketCap. JPMorgan strategists say the FTX debacle could transform the industry.
Here’s what crypto’s latest blowup could mean:
Crypto has famously had little oversight, partly by nature.
„The separation of crypto from the regulator was a design choice,“ said David Yermack, the Albert Fingerhut Professor of Finance and Business Transformation and chair of the finance department at NYU’s Stern School of Business.
