Source : cointelegraph.comhttps://images.cointelegraph.com/images/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMTEvZDhhYzhmMjEtM2I5OS00YTc5LTllNDItZTU0MDFkNGM4OWE0LmpwZw==.jpg
Who would’ve thought that the implosion of Terra, the collapse of Three Arrows Capital and the bankruptcies of Celsius and Voyager wouldn’t be the most terrible crypto stories of 2022? In retrospect, crypto’s day of reckoning — and the new low for the cycle — hadn’t arrived even after all these tumultuous events.
The industry’s cyclical execution occurred this week when FTX — the world’s second-largest crypto exchange — was feared to be insolvent and on the brink of collapse. Those fears stemmed from FTX’s incestuous relationship with Alameda Research, a trading firm founded by FTX CEO Sam Bankman-Fried — As it turns out, FTX was trading on Alameda revenue to prop up its business, offering its illiquid and useless FTX Token (FTT) for Alameda’s Tether — Amid reports that FTX’s native token comprised roughly 40% of Alameda’s assets, Binance CEO Changpeng Zhao announced that his exchange would liquidate its entire FTT stash. It was the same Zhao, also known as CZ, who offered to buy FTX a few days later to save it from imminent collapse. While Bankman-Fried agreed to the deal, credible rumors suggest that CZ is backing out because of a huge hole in FTX’s finances. (Those rumors have since been confirmed to be true.)
Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won’t pretend to make love after divorce. We are not against anyone. But we won’t support people who lobby against other industry players behind their backs. Onwards.
— CZ Binance (@cz_binance) November 6, 2022
This week’s Crypto Biz newsletter isn’t for the faint of heart.
Breaking: Binance CEO announces intent to acquire FTX to ‘help cover the liquidity crunch’
After trying to quell rumors of FTX’s liquidity issues, Bankman-Fried announced on Nov. 8 that his firm had agreed to a Binance takeover — a move intended to ensure that all existing users would be made whole. “I know that there have been rumors in media of conflict between our two exchanges, however Binance has shown time and again that they are committed to a more decentralized global economy while working to improve industry relations with regulators,” Bankman-Fried tweeted. (It was later reported that CZ and Binance looked under the hood of FTX and didn’t like what they saw, so they’re backing out of the deal.)
Binance CEO shares ‘two big lessons’ after FTX’s liquidity crunch
Whether he likes to admit it or not, CZ played a major role in FTX’s collapse this week when he tweeted his intent to liquidate Binance’s FTT holdings. As the whole ordeal played out, CZ sounded off on “two big lessons” he learned from the FTX saga: “Never use a token you created as collateral” and “Don’t borrow if you run a crypto business.” He also confirmed that “Binance has never used BNB (BNB) for collateral, and we have never taken on debt.” Massive debt, poor asset management and highly risky trading practices have been common themes in this year’s crypto market mayhem.
Two big lessons:
1: Never use a token you created as collateral.
2: Don’t borrow if you run a crypto business. Don’t use capital “efficiently”. Have a large reserve.
Binance has never used BNB for collateral, and we have never taken on debt.
— CZ Binance (@cz_binance) November 8, 2022
Galaxy Digital discloses $77M exposure to FTX, $48M likely locked in withdrawals
As FTX began to unravel, it didn’t take long for businesses to step forward and acknowledge their exposure to the sinking crypto derivatives exchange. On Nov. 9, blockchain financial services company Galaxy Digital disclosed that its exposure to FTX was worth nearly $77 million consisting of cash and digital assets. The company also acknowledged that $48 million of that total was likely locked in withdrawals. Like many other collapsing exchanges and lenders, FTX announced that it was halting withdrawals to prevent a bank run while its FTT token was in freefall.
Meta joins big tech layoffs, lets go of 11,000 employees
If crypto news wasn’t bad enough, Facebook operator Meta announced this week that it would lay off roughly 13% of its staff, equivalent to 11,000 people. Like other big tech companies, Meta is hemorrhaging money due to soaring costs and a declining economy. Meta’s metaverse division, dubbed Reality Labs, lost $3.672 billion in the third quarter, raising serious doubts about its metaverse ambitions. Some of Meta’s shareholders are growing concerned that Mark Zuckerberg’s metaverse experiment might not bear any fruit. The Zuck could dole out as much as $100 billion toward his metaverse business over the next ten years. Is that a gamble you’d make?
BREAKING: Meta CEO Mark Zuckerberg says the company will cut 13% of jobs affecting more than 11,000 employees, the first major round of layoffs in the social media giant’s history https://t.co/heUXkZEQPL pic.twitter.com/yFg8tZbI0i
— Bloomberg (@business) November 9, 2022
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