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After undergoing the digital equivalent of a bank run, the exploding cryptocurrency trading business FTX has lost billions of dollars. According to analysis, hundreds of millions of dollars have been lost due to what the trading firm declared as “unauthorized access.”
Clients fled the firm, withdrawing billions of dollars all at once due to worries about the firm's balance sheets. This incident makes you wonder whether cryptocurrencies will survive or not.
In response to the shocking FTX disaster, Michael Saylor, the billionaire executive chairman of MicroStrategy, claimed this incident exposed the problems of cryptocurrency, which can now be mended. He also mentioned that this possible incident might drive investors towards bitcoin. He has a point, though. This decentralized cryptocurrency has sparked so much attention since its inception that many websites and businesses have become bitcoin-friendly.
Bitcoin casinos on the rise
With the growing rise in popularity for internet casinos and games, several companies in the betting industry have begun to accept cryptocurrencies such as bitcoin as payment options. You can even compare the casino operators using the tools as reported here.
While this is still good news for bitcoin investors, Michael Saylor explains what went wrong on FTX.
"A tragic Situation," says Michael Saylor of the FTX's collapse
The executive chairman of MicroStrategy presented a breakdown of what happened in the FTX in an interview on Fox Business’s show “Making Money with Charles Payne” and called the event a tragic one. According to Saylor, FTX produced cryptocurrencies such as FTT or Serum and pushed others before transferring them to Alameda, the investment company run by FTX CEO and founder Sam Bankman-Fried.
Because the supply was mostly in favorable hands at the time, Saylor mentions that they were able to push the value of those coins up via insider wash trading. According to him, the price was subsequently raised to an income and spending worth of $14 billion.
Who Is at the Fingers End
Saylor informed presenter Charles Payne that skeptical Bitcoiners typically believe that crypto casinos are simply rigging the value of the token in order to unload it at retail. But Bankman-Fried added a particularly sinister spin to the whole thing.
Saylor said that Bankman-Fried sought to use the $14 billion in erroneous tokens created through insider trading as security for a ten-billion-dollar loan, but his own bank was the only one prepared to approve one.
According to Saylor, this is how Bankman-Fried sneakily leeched off tens of billions of dollars’ worth of real assets or more from FTX and Alameda. They then used the money to buy condos in the Bahamas, stadium rights, advertising, and endorsements from celebrities. The poetic justice is that they eventually lost the money after making a lot of bad trades.
The Flaws Are Revealed, but It's Not the End Yet
Saylor continues to be a strong supporter of bitcoin and contends that other investors will turn to the virtual currency as a result of the catastrophic scenario with FTX. He referred to bitcoin as the top “powerful computer network" in the world and said it fits the bill for investors who don't trust traditional or cryptocurrency banks, including those considering alternatives to fiat with falling values.
What Went Down With FTX
The collapse of the once-dominant exchange is having a profound impact on the crypto business. Here is an overview of the company's demise thus far:
Reasons Behind the Bankruptcy
Customers abandoned the exchange due to concern that it had adequate money, and FTX decided to trade itself to competitor cryptocurrency exchange Binance. But while Binance was still conducting its due diligence on FTX's balance sheet, the deal fell through.
According to its insolvency petition, FTX cited more than 130 linked firms worldwide and valued its resources at $10 billion to $50 billion.
On Friday, the bankruptcy case was filed in Delaware by FTX and several of its related businesses, including founder Sam Bankman-Fried's hedge fund, Alameda Research.
The events of the last week were a startling twist of fate for Bankman-Fried, who earlier this year was hailed as something of a hero when he assisted in saving several bitcoin businesses that were having financial difficulties.
Officials Allege That the Accounts Have Been Hacked
Hours after the business sought Chapter 11 bankruptcy protection, FTX authorities announced on Saturday that there had been illegal access to its accounts. Social media users began debating whether the exchange had been compromised or whether a staff member had pilfered money, a scenario that bitcoin experts couldn't completely rule out.
Uncertainty exists around the precise amount of money involved, however, analytics company Elliptic estimated that $477 million is lost from the transaction. John Ray III, the new CEO of FTX, announced that the company was stopping all trading and withdrawals and taking action to protect clients' investments.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.