The FTX Insolvency Crisis: How It Affects the Crypto Ecosystem

After a Twitter feud between FTX’s CEO Sam Bankman-Fried and Binance’s CEO CZ, it was suggested that FTX was insolvent. Turns out that was a lie. Here's what you need to know about the FTX insolvency crisis.

December 6, 2022

PB Team

Sam Bankman-Fried (SBF) is the CEO of FTX, a cryptocurrency exchange. FTX is quite large and one of the more popular exchanges that have been used in the past. He is also the founder of Alameda Research, a quantitative trading firm.

FTX was launched in 2019 and has quickly become one of the leading exchanges in the space. The exchange offers a wide range of products, including futures, options, and spot markets. Recently, FTX has been all over the news for how they've dealt with users’ funds. Essentially, FTX was using users’ funds for a variety of reasons (all of which break FTX’s terms of service document and are, therefore, illegal), including funding their own poorly-performing crypto trading fund called Alameda Research.

Now, this was all uncovered after a Twitter feud between FTX’s CEO Sam Bankman-Fried and Binance’s CEO CZ. In the feud, CZ suggested that FTX was insolvent, causing the price of their exchange token, $FTT, to fall considerably. SBF then publicly claimed that all assets at FTX were safe and they were perfectly solvent. Turns out that was a lie. Very shortly later, it comes out that FTX was insolvent and that is due to a majority of their collateral being user funds and their own token, $FTT.

Now, in light of all of this, fear has spread throughout the crypto industry that FTX is not the only one that is insolvent. In fact, many larger firms and exchanges had exposure to FTX and their funds held at FTX were essentially rendered useless and worthless. However, a lot of the companies that are actually involved are just conjecture as no one knows for sure.

"The entire crypto industry was on an upswing... we could be near bottom of market."

Despite all of this happening (and we're barely scratching the surface here!), the entire crypto industry was on an upswing and many of our analysts believe we could be near or at the bottom of the market, and they suggest that we may even actually see a bullish push into the new year. Crypto is not going anywhere, despite the recent doom and gloom. There are many reasons why this is true, most importantly being that there is too much money sloshing around in the hands of the “big boys.”

But you’re probably wondering, which exchanges are really safe right now? And the answer is - that you can never know for sure, but we have a couple of really good guesses. The exchanges that our team still trusts and believes in are Binance, Coinbase, and OKx.

Binance is an obvious one, with $64.3B in assets and an incredible global presence Binance is likely one of your safest bets right now. Binance was one of the first crypto exchanges to implement a 2FA system and has always prided itself on transparency and safety. Binance was also one of the few exchanges to release a detailed report on their financial situation!

Next, we have Coinbase, which has been a safe haven for a lot of people in the crypto world since they first launched. In fact, they are now the #2 cryptocurrency exchange in the world (behind Binance). Coinbase has been one of the few exchanges that have followed all of the rules, even before they were rules. Coinbase took off due to its availability in the USA, and its easy-to-use platform, they also have a reputation for always bending to the demands of the government, and as a result, Coinbase has cemented itself in the cryptocurrency world for a long time.

Lastly, we have OKx. OKx is very similar to Binance and shares most of the same features, values, and visions. They are a global marketplace and have many, many features and educational opportunities, they are just a little bit smaller than Binance. There is nothing fundamentally different, except for its user and volume count! In fact, most of our analysts use OKx for their trading.

Now, of course, nothing is 100% and if you're on a central exchange you do not have your keys to your crypto wallet, and if “not your keys, not your crypto!” So, to circumvent this, please note that you must use a COLD WALLET. A “hot wallet,” like MetaMask or Coinbase Wallet, is a good option too, but a cold wallet is always best! Our team recommends Ledger! Now, these are not terribly convienent, especially if you are an active trader. Which is why we gave our recommendations above, but please remember the only true way to avoid any chance that your funds are stolen is through a cold wallet.

In conclusion, our team believes the FTX situation will ultimately be good for crypto. A sort of “get rid of the filth” mentality. But for the time being, there will likely be some increased volatility and fear in the market.

Come consider trading and monitoring the market with us here! We hope you are all safe and healthy during this difficult crypto time!