Updated: Nov 22, 2022
In the past few quarters, there had been a continuous slide in the Cryptocurrency arena in terms of trust, transactions, value and the hype it got when the money was easy and cheap. With this slide, the liquidity also has reduced and when such a scenario builds up the crisis arises when any large holder tries to sell his holding.
This is exactly what happens three days ago when Binance one of the large FTT( FTX Token) holders announced that it going to sell part of its $2Bn holding and would try to do it without impacting the price. But within a few hours of such a tweet, the price of the token fell by 15% and there were few large transactions reported in FTT.
This would have been a restricted fall limited to the transactions but there was a Twitter spat that it has started between Binance and FTX founders. This led to the next fall in the price that trigger a lot of margin calls in the next 24 hours.
Given that it is logical for any finance related or company that can be hit with withdrawal at any time to keep some level of reserves. But when the withdrawals amount to 6 or 7 times that can be handled then the reserves are also insufficient. But according to Binance's due diligence and some other reports, all the reserves on the books were already used for lending and borrowing at the same time making it into a full-blown crisis.
On the revelation of this, the fall accelerate and now the value is $ 2.4 against $26 from where all this started. The irony of all this is, that a few months back FTX's founder was taken to be the Crypto Saviour as they acquired many dead or to be dead projects but now the saviour project itself is on verge of bankruptcy.