The financial meltdown of the crypto exchange FTX came almost without public warning. Valued at $32 billion in early 2022—the company filed for Chapter 11 bankruptcy on November 11th.
CEO Sam Bankman-Fried (SBF) launched FTX in 2019 when he was 29. Two years later, Forbes estimated his worth at $16 billion.
Yahoo news reported on SBF around that time. They claimed he garnered “…the fastest accumulation of self-made wealth in history.”
What caused such a rapid decline?
On November 2nd, CoinDesk, a crypto news site, published a story about SBF’s trading arm. Alameda Research, founded by SBF in 2017, acted as a precursor to FTX.
CoinDesk mentioned a “private financial document” they reviewed in the piece. Alameda’s balance sheet, they claimed, held billions worth of FTT, an FTX digital token.
Among the “unlocked FTT,” “FTT collateral,” and “locked FTT” were $7.4 billion of loans.
That pegged most of Alameda’s net equity to a token created and controlled by SBF. The company also held billions in SOL, the native token of Solana, a blockchain platform. (Other held tokens were also connected to SBF.)
Changpeng Zhao (CZ), CEO of Binance, runs the world’s largest cryptocurrency exchange. Binance is a major FTX competitor.
The CoinDesk story may have caused CZ to liquidate his company’s FTT holdings.
On November 6th, CZ announced Binance would get rid of its entire FTT position—worth $529 million.
The price of FTT plummeted while SBF said that FTX was “fine.” FTX customers requested $6 billion in withdrawals. The money wasn’t there.
SBF asked for a bailout from Binance. They reached a non-binding deal that Binance backed out on the next day.
The contagion began to spread throughout crypto markets.
As the entire market fell, the price of Bitcoin plunged to around $15,000. That represented its lowest level in two years. The collapse of FTX moved to other exchanges, with BlockFi, a crypto lender, as the next victim.
On November 15th, an FTX investor filed a class-action lawsuit with a Florida court. The suit sought a reported $11 billion in damages. In December, the U.S. House Financial Services Committee will hold a hearing on the FTX collapse.
BlockFi plans to file for bankruptcy. Other industry participants like Gemini and Genesis paused withdrawals and loans.
Current market volatility drives crypto prices to lower lows.
The sports betting market is an industry experiencing a boom period. Offshore sportsbooks take crypto as a form of payment from their customers.
The lower prices may cause some concern among gamblers. Depositing with crypto as it falls in price isn’t exactly ideal.
Still, offshore gambling sites get licensed and regulated. Their regulatory framework provides customers with a sense of security. They offer welcome bonuses to new players, catering to crypto deposits.
Top online sportsbooks like BetUS and Bovada provide over 100% match bonuses. Together, these companies have been in business for almost four decades.
Crypto betting offers lower transaction fees, faster withdrawals, and fewer restrictions.
The collapse of FTX’s shady crypto exchange comes enshrouded in laizze-faire incompetence. In the short term, these are bad optics. In the long run, better regulation may remove people like SBF from the crypto space.
It might cause gamblers to find more reputable exchanges and reliable digital tokens. That’s a good thing.
The crypto betting market may experience a short-term lull. When it comes to regaining investor confidence, that might take some time as well.
Many crypto detractors consider the industry to exemplify a financial bubble. To that effect, the collapse of FTX presents a strong case.
There’s also a bit of cloudiness about SBF’s political ties.
For the 2022 midterm elections, FTX contributed tens of millions to Democratic candidates. SBF was the second-largest donor.
SBF also gave $13 million to Protect Our Future, a super PAC. Most of that money went to Democratic candidates for TV ads and direct mail.
Over 90% of SBF’s multi-billion-dollar net worth got eviscerated within days. Lawsuits and investigations may reveal what happened.
Will government agencies make an example of SBF for the crypto market?
SBF continues to scramble and plug a leak in his company worth billions. That contagion led to a major loss in value for the crypto market.
Public confidence in crypto may fall to an all-time low. Industry players who believe Bitcoin to be the only true “crypto” might be the only winners.
Some speculate that Bitcoin could rise to six figures. Others say the collapse of FTX set the space back months—or even years.
For all the predictions and estimates, who could’ve seen this coming?
Going forward, forecasters with clarity may have the biggest impact on crypto.
To learn more about crypto betting, check out the best offshore betting sites.