In this overview article, we reconstruct the chronology of events of the sudden and unexpected crash of the second biggest crypto exchange FTX, as well as its unexpected bailout from Binance. Also, we try to understand what it was all about.
Let’s try to reconstruct the entire timeline of events in order to understand what happened.
Analysts have yet to digest and understand what it was and who was to blame. Certainly, this is another market shock not inferior to the scale of the Terra/Luna/Celsius crash, the only important difference being in this case, that Binance is ready to buy out all troubled assets to save the situation. But how was this crisis possible?
The brand new newsletter with insights, market analysis and daily opportunities.
Let’s grow together!
CZ of Binance seems to be the only winner in this battle (though time will tell, this war is not over). Right now he is dominating and giving out advice on his Twitter about how not to get into a similar difficult situation to FTX.
He made two very important tweets, which can be called the main conclusions of what happened. Let’s look at them further.
CZ writes:
Two big lessons:
1: Never use a token you created as collateral.
2: Don’t borrow if you run a crypto business. Don’t use capital “efficiently”. Have a large reserve.
Binance has never used BNB for collateral, and we have never taken on debt.
This wish seems like the quintessence of everything that happened to the crypto market in the current year, which started the long crypto winter. It looks like what financiers call “collateral damage” happened under attack with FTX (earlier exactly what happened with Terra/Luna/Celsius and started the crypto winter era). Greed for cheap and big money led to the creation of clever borrowing schemes that held onto the hope of stability and predictability in the market. Any unexpected stress test (for FTX, such as the Binance attack) instantly made the borrowing scheme inoperable.
And the next important tweet from CZ, which makes a logical conclusion from the first one:
All crypto exchanges should do merkle-tree proof-of-reserves.
Banks run on fractional reserves. Crypto exchanges should not.
Binance will start to do proof-of-reserves soon. Full transparency.
The abundance of risky schemes in crypto leads to the permanent danger of the collapse of entire floors of the crypto industry, so the era of trust seems to be ending. CZ is calling for regulation and transparency for everyone in crypto to make situations like FTX or Terra/Luna impossible (or unlikely).
Following Binance, exchanges OKX, Huobi, KuCoin and Gate also announced that they will start publishing transparency reports on their reserves.
A very interesting thread that summarizes CZ’s claims, drawing a new crypto reality, is given by Circle CEO — we recommend reading it to anyone interested in this topic.
Hermetica Labs announces the debut of USDh, a pioneering Bitcoin-based synthetic United States dollar featuring…
Turkey, a significant player in the global cryptocurrency landscape, is gearing up to introduce crypto-related…
The decision by zkSNACKs to discontinue its CoinJoin coordination service has stirred concerns among Bitcoin…
Hello, fellow crypto enthusiasts! 👋 As we embark on another week in the ever-evolving crypto…
EigenLayer, a protocol for Ethereum restaking, recently announced an airdrop plan that garnered both praise…
Keonne Rodriguez, a figure linked to the cryptocurrency mixing service Samourai Wallet, has entered a…