Another ice age struck the cryptoworld

 FTX, the world's second largest cryptocurrency trading platform, is on the verge of bankruptcy. The latter may be another sign that centralized control of money is an inherent feature of it, concludes Kristian Port in a technical commentary on R2.

Antigua and Barbuda, a sovereign nation of 97,000 inhabitants, is located in the West Indian Archipelago, at the junction of the Caribbean Sea and the Pacific Ocean. The name comes from the two larger islands from which the capital island of Antigua was named by Christopher Columbus. As a member of the British Commonwealth, the island is governed by a constitutional monarchy, with Charles III, who has just become King of the United Kingdom, as head of state.

The economy of the country revolves around tourism, a significant part of which is made up of so-called tax tourists. Antigua and Barbuda does not burden its subjects with income tax. The combination of beautiful weather and nature with tax laws is the reason why the island state is considered a tax haven. One can become a citizen by birth or through an investment program, i.e., by bringing a business there.

FTX, the second largest cryptocurrency trading platform in the world, is registered in Antigua. The largest peer company, Binance, is registered nearby, in the other famous tax haven of the Caribbean, the island nation of Cayman. The reasons are clear.

The cryptocurrency exchange service allows customers to trade between cryptocurrencies and regular money or vice versa. The exchange environment earns its share by speculating on exchange rate differences or simply on service fees. Both companies are relatively young, one three years old and the other five years old.

Despite their relative youth, they are companies worth billions of dollars. Receiving money from the private investor market, FTX, with one million users, was valued at $32 billion in January of this year. By then, the value of bitcoin had doubled in six months and was worth about $67,000. The money was flowing and life was great!

FTX was founded in 2019 by Sam Bankman-Fried and Gary Wang. The former was better known to the general public and was better known by the acronym SBF. Bankman-Fried quickly became a billionaire philanthropist, using the new money to support a variety of initiatives, from philanthropy to mind-blowing ventures.

Among other things, he offered Ilon Musk billions to fund the purchase of Twitter and was a major supporter of Democratic President Joe Biden. At the end of October, SBF's assets were valued at more than ten billion dollars. By Tuesday of this week, the value of its assets had fallen 94 percent.

The incident is considered a unique impoverishment in its scale and speed. SBF is not poor in the general sense of the word, but it now has millions of dollars instead of billions. Moreover, the decline that hit it is not over yet. Other investors have suffered big losses as well. There are fears that the new shock will not end there.

In addition to losing money, the case casts a bad shadow over several well-known investment companies, such as Sequoia, Softbank, BlackRock, and that list includes a dozen other players who are funding new ideas with big money. There are fears that in the future, financiers will lose their courage and willingness to work in cyber money. As expected, bitcoin fell to its lowest price in two years, around $16,000, within hours of the news. The drop since the beginning of the year has been more than 63 percent and has not stopped in any way.

So what happened? Within a short time, many brokerage clients wanted to get their money out of the trading environment. They wanted six billion dollars in three days. It probably wouldn't have been a problem if customers had asked for their money back in a more random way because there are a lot of flexible assets with fluctuating values moving around in the system.

This time, the reason was more targeted. The aforementioned Binance announced that it would sell all FTX-issued cyber instruments. The situation is seen as a competitor attack, which apparently succeeded. Rumors began to spread about the billions stuck under FFT, a financial instrument of its own value, created to trade on FTX, because no one wanted to exchange them for cash.