Did you know how the third-largest exchange in the world collapsed within a few days?
In November 2022, FTX crashed, and FTT, its token, fell from about $25 to about $1. Here is how it happened.
FTX was an exchange widely seen as trustworthy, and its founder, Sam Bankman-Fried, was regarded as a genius. But he had a second company called Alameda Research, which traded with its own money.
Alameda held a large amount of FTT as capital. In other words, a company created a token, then held it as an asset that gave it strength. This made Alameda's financial strength depend on the price of FTT.
In November 2022, a report exposed this, and then Changpeng Zhao of Binance said he would sell his FTT. People panicked and rushed to withdraw their money. It was reported that about $6 billion was withdrawn in three days.
It then emerged that FTX did not have enough money to pay everyone, because customers' funds had been used improperly. FTX filed for bankruptcy protection on November 11. Bankman-Fried was later found guilty and sentenced to 25 years in prison.
Today, some FTT holders are waiting for payouts from the bankruptcy process, but it is not known how much they will get.
What I learned: if an exchange creates its own tokens and holds them as capital, ask yourself whether that capital has real value. And keep your money in your own wallet, not on an exchange.
What about you? Have you ever lost money on an exchange? What lesson did you take from it? I'd love to hear your story in the comments.
This is not advice to buy or sell.
$FTT #FTT/USDT $AVA $HBAR
In November 2022, FTX crashed, and FTT, its token, fell from about $25 to about $1. Here is how it happened.
FTX was an exchange widely seen as trustworthy, and its founder, Sam Bankman-Fried, was regarded as a genius. But he had a second company called Alameda Research, which traded with its own money.
Alameda held a large amount of FTT as capital. In other words, a company created a token, then held it as an asset that gave it strength. This made Alameda's financial strength depend on the price of FTT.
In November 2022, a report exposed this, and then Changpeng Zhao of Binance said he would sell his FTT. People panicked and rushed to withdraw their money. It was reported that about $6 billion was withdrawn in three days.
It then emerged that FTX did not have enough money to pay everyone, because customers' funds had been used improperly. FTX filed for bankruptcy protection on November 11. Bankman-Fried was later found guilty and sentenced to 25 years in prison.
Today, some FTT holders are waiting for payouts from the bankruptcy process, but it is not known how much they will get.
What I learned: if an exchange creates its own tokens and holds them as capital, ask yourself whether that capital has real value. And keep your money in your own wallet, not on an exchange.
What about you? Have you ever lost money on an exchange? What lesson did you take from it? I'd love to hear your story in the comments.
This is not advice to buy or sell.
$FTT #FTT/USDT $AVA $HBAR