Cryptocurrency is a very high-risk investment due to its volatile nature. Some people make their millions and some lose every penny they have invested. The crypto market has just suffered another shock this month following the collapse of FTX…
What is cryptocurrency?
Cryptocurrency is any form of currency that exists virtually, using cryptography to secure its transactions. Cryptocurrency exists entirely within the digital sphere… it is not tangible.
For a more in-depth explanation of how it all works, check out this blog.
Falling Values
In November 2021, the Bitcoin price was at an all-time high of $69,000 whilst just a year on, it has fallen to under $17,000.
Ether, the cryptocurrency of the Ethereum network, which is the second most popular cryptocurrency after Bitcoin, has followed a similar trend.
Ether also reached new heights in November last year, pricing at $4,800, whilst it has now fallen to under $1,200.
Why the Crash?
Crypto prices massively fluctuate and can drop in an instant in response to major crypto events like coins or exchanges crashing.
The crash in cryptocurrencies this month has been triggered by the latter, with the sudden collapse of FTX.
What is FTX?
FTX was a crypto-exchange company based in the Bahamas which allowed people and companies to trade currencies virtually.
The $32 billion company is now bankrupt.
Mismanagement
Sam Bankman-Fried resigned as CEO of the company on 11th November, being replaced with John Ray III who has previous experience at other companies of helping investors gain back losses.
John Ray III said that FTX had faced “unprecedented and complete failure of corporate controls”, with a lack of regulatory oversight and sufficient record keeping. The company failed to keep proper records or security controls for the digital assets it held on behalf of its customers and turned to software to hide their misuse of customer funds.
He also said that a “substantial portion” of assets held by FTX may be missing or stolen and that corporate funds had been used to buy homes in the Bahamas as well as other things for employees.
There are also reports that Bankman-Fried may have used FTX consumer deposits for trading on his crypto hedge fund, Alameda Research.
FTX is currently being investigated by the US Department of Justice, the Securities and Exchange Commission, and police in the Bahamas.
Binance’s Cold Feet about Acquiring FTX
FTX was originally set to be acquired by its rival, Binance. However, after looking at FTX’s books, Binance announced its withdrawal from the deal earlier this month.
On 10th November, Binance tweeted:
