VOT Research Report
Market Analytics and Considerations
Sam Bankman-Fried, CEO of the cryptocurrency exchange previously considered too big to fail, issued one of his first public pronouncements following the demise of FTX and apologetic.
A few months ago, Bankman-Fried, commonly referred by his initials SBF, established himself as the crypto industry’s “white knight” after he and his organization FTX provided support to businesses struggling in this year’s “Crypto Winter.” He was personally worth almost $16 billion and his firm was worth $32 billion, but he is now telling how two blunders caused all of it to vanish in a couple of days.
After competing cryptocurrency exchange company Binance virtually forced FTX into bankruptcy over night, SBF now needs a bailout of his own. A public argument between SBF and the CEO of Binance, Changpeng Zhao, also known as CZ, revealed significant liabilities on FTX’s books, which was followed by a surprise takeover offer from Binance that failed within a single day.
SBF is acknowledging his role in the incident, which has shaken the crypto community once again after a trying year and upended the mostly unorganized and fragile ecosystem.
FTX collapse
SBF has fallen quickly and spectacularly. Even major investor Sequoia Capital, which on Thursday cut down its $214 million investment in the company to zero, has now declared FTX to be worthless.
SBF acknowledged that FTX had a liquidity crisis in his Twitter message after users surrendered $5 billion out from exchange in an only one day.
How and What Went Wrong?
His perception of leverage was 0x when it was actually 1.7x due to this bad labelling, and his perception of his fluidity was 24 times the usual daily outflows when it was truly just 0.8x. In all other words, he had significantly less funds to cover it rather than he anticipated and was more leveraged than he imagined. He then found himself here after Sunday’s withdrawal of about USD 5 billion.
While Binance investigated the prospect of a takeover transaction, SBF regretted separately for not keeping FTX users informed enough. He said that his “hands were constrained” and that he “was just not especially permitted to speak more openly.
Alameda Research, FTX’s sibling company, is currently “coming to a close trade,” according to SBF. U.S.-based FTX users won’t be impacted. He asserts that FTX International is solely to blame for the liquidity shortage and that “FTX US, the American-accepting exchange situated in the United States, was not monetarily damaged by this clown show. 100% of it is fluid in financial terms
What is taking place right now?
Since the parent network of the token, Ethereum, modified the way it handles transactions over two months ago, Ether (ETH) has entered a deflationary phase for the first time.
According to data from ultrasound money, the annualized inflation rate for the second-largest cryptocurrency has decreased to 0.029%, meaning that the top smart contract blockchain is currently using more ether than is being created.
Since Ethereum switched from a solid evidence (PoW) resolution method to a proof-of-stake (PoS) consensus protocol for validating transactions on September 15, the negative inflation rate indicates that ether’s net quantity has decreased by 5,598. If Ethereum had continued to use the PoW technique, the supply of ether would have increased by around 670,000.
The upgrading, known as Merging, put ether on the route towards becoming a deflating asset by switching the entity in charge of maintaining the blockchain from miners to validators and precipitating a sharp decline in the amount of newly created ETH. Following the Merge, Ether’s yearly inflation rate plunged from over 3.5% to almost nil.
But it took over two months for the deflationary benchmark to be met, with an increase in the amount of ether destroyed as a result of recent activity on the Ethereum network. That indicates that the degree of usage patterns has a significant impact on ether’s potential as a deflationary asset.
Within the last three days only, more over 13,000 ETH have been burnt. A mechanism to burn a portion of user fees was introduced in August of last year via the Ethereum Improvement Proposal (EIP)-1559. In essence, the EIP links system capacity to the proportion of ether consumed.
Currently (this Friday) – The recent rise in network activity may have been caused by the market instability brought on by the demise of the crypto exchange FTX. Since FTX’s liquidity issues were known, millions of dollars’ worth of cryptocurrency funds have been transferred on-chain. Selected users of FTX were given access to Ethereum withdrawals on Thursday.
For the time of this publication, ether traded at $1,270, a 1.7% decrease from the previous day.
Some relief from yesterday’s CPI statistics on Friday (today) – After a four-day bloodbath brought on by FTX’s decline, the cryptocurrency markets breathed a sigh of relief following a favorable Consumer Price Index data.
In contrast to Ethereum, the second-largest cryptocurrency, which surged to above $1,200, Bitcoin recovered to surge past $17,000. Polygon also reached the $1 threshold.
For the time of this publication, ether traded at $1,270, a 1.7% decrease from the previous day.
