As per research by CoinDCX, the FTX exchange headed by SamBankman -Fried has highlighted liquidity and solvency woes and unpleasant questions are being asked about the health of the balance sheet since the exchange has consistently borrowed its own native token FTT as collateral.
The woes of the crypto sector have worsened after the FTX Failure. It is for the second time that the crypto sector has been dealt a death blow after the Terra crash. The bearish sentiments prevailed after FTX was hit by a deluge of withdrawals by panicked investors and this led to a major liquidity crunch. It is now rumored that the exchange has struck a deal with its arch-rival Binance.
Investors were pensive because of contagion worries and recently FTX had advocated for stringent regulations.
FTX Failure Led Crypto Sector Market Cap To Shrink By 15%
FTX Failure is the second major scandal that has hit the crypto sector after the Luna crash which precipitated one of the worst crypto winters and wiped out over $60 billion from the crypto ecosystem after its algorithmic stablecoin was de-pegged, leading to mass liquidations across several DeFi Protocols.
There have been heightened concerns about the financial health of the FTX exchange, The panic withdrawals have heightened the crisis and it is reported that there have been withdrawals to the tune of $6 Billion in just three days. Binance said it agreed to buy FTX’s non-US unit post due diligence.
Edul Patel, CEO, and co-founder, of Mudrex, said that after the exchange suffered a lack of finances and liquidity, other large investors could not help fill in the gap. But, Binance could do this by acquiring FTX.
On the downside, the latest happening has once again led to carnage in the crypto sector and it is estimated that the funds in the sector have contracted by 15% to $860 billion levels from $1.05 trillion in little more than 24 hours, according to data from Coinmarketcap.