FTX Collapse

FTX began 2022 as the third-largest crypto exchange in the world, with a valuation of over $32 Billion. Eleven months later, FTX filed for bankruptcy and plunged the crypto landscape into chaos. Here's what happened: 

The Background: On Nov. 2, Coindesk reported on a leaked balance sheet from Alameda Research. Alameda is a hedge fund run by Sam Bankman-Fried (SBF), the founder and CEO of FTX.

Both organizations are separate entities, however, the leaked balance sheet suggested that Alameda held about $5.5 Billion worth of FTT in collateral and debt leverages. A hedge fund holding a large amount of one asset led the crypto-community to raise questions about the relationship between FTX and Alameda. 

On Nov. 6, Alameda CEO Caroline Ellison said that the leaked balance sheet was just "a subset of our corporate entities," and that other assets worth over $10 Billion aren't listed. 

The Crisis: On Nov. 6 the CEO of Binance, Changpeng Zhao (CZ) said this on Twitter: 

"As part of Binance's exit from FTX equity last year, Binance received roughly $2.1 Billion USD equivalent in cash (BUSD and FTT). Due to recente revelations that came to light, we have decided to liquidate any remaining FTT on our books." 

There was another tweet that drew attention: 

"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." 

The next day, SBF fired of a series of tweets accusing "a competitor" for creating FUD, and claiming that FTX and its assets were "fine". However, analysts warned of a collapse, and these developments had traders scrambling to liquidate their FTT tokens. 

Withdrawal requests amounted to over $6 Billion, and data showed that stablecoin outflows on FTX reached $451 Million over seven days, on Nov. 7. On Nov. 8, the FTT price dove to $15 from $22 in a matter of hours. 

Just a day after claiming FTX was fine, SBF announced that FTX was facing a liquidity crunch, and that they had come to an agreement to sell the exchange to Binance. 

CZ announced that Binance had signed a nonbinding letter of intent to acquire FTX, but they also reserved the right to "pull out from the deal at any time." On Nov. 9, Binance pulled out of the deal citing "mishandled customer funds and alleged US agency investigations." 

The websites of FTX Ventures and Alameda Research went dark, and SBF reportedly called on investors for $8 Billion in emergency funding to cover the liquidity crunch. 

On Nov. 11, FTX filed for Chapter 11 bankruptcy protection in the US, SBF stepped down as CEO and has been succeeded by John J. Ray III. FTX US resigned from the Crypto Council for Innovation and announced that they may halt trading on the platform in a few days. 

The Aftermath: These developments rocked the crypto markets, the Bitcoin price plummeted to a multi-year low of $15,600. FTT itself dropped to $1.3. Just days after Solana announced its partnership with Google Cloud, the token drop 65% to $13. 

Nearly all major stablecoins lost their dollar pegs as market volatility and redemptions surged, but most recovered as the markets stabilized. According to a report by Glassnode, BTC exchange outflows hit a historic high of 106k BTC per month. This suggests that investors are increasingly moving their holdings to self-custody solutions following FTX collapse. 

Subsequently, Binance and other exchanges including OKX, Kucoin, Huobi, Bitfinex, and Crypto.com have committed to issuing a proof-of-reserves attestation in the coming days, weeks or months. 

The market appears to have stabilized, Bitcoin is trading at $16,500 at the time of writing and analysts are getting bullish as the worst appears to be over.

Source: NYT, CNBC, NBC, Cointelegraph, FinancialTimes

Zimbabwe to Introduce Gold Coins as Local Currency Tumbles

Zimbabwe says it will introduce gold coins later this month as it tries to curb soaring inflation amid a slump in its currency. 

The country's central bank also outlined plans to make the US dollar legal tender for the next five years.

The central bank's main interest rate was more than doubles this month to 200% after the annual rate of inflation rose above 190%.

Zimbabwe's dollar has slumped in value against major currencies this year.

The gold coins, which will contain one troy ounce of 22-carat gold, will be available from 25 July, John P. Mangudya, the governor of the Reserve Bank of Zimbabwe, said in a statement.

A troy ounce is a unit of measure used for weighing precious metal - such as gold, silver and platinum - that dates back to the Middle Ages. One troy ounce is equal to 31.10g.

"The gold coins will be available for sale to the public in both local currency and US dollars and other foreign currencies at a price based on the prevailing international price of gold and the cost production." Mr. Mangudya added. 

The statement also said each coin will be identified with a serial number and can be easily converted to cash, locally and internationally.

It will be called the "Mosi-oa-Tunya Gold Coin", which means "The Smoke Which Thunders", a reference to Victoria Falls that is located on the border between Zimbabwe and Zambia.

The announcement is part of the Zimbabwe government's measures to tackle the country's currency crisis.

Last month, the annual rate of inflation hit 191.6%, while the Zimbabwean dollar has lost more that two-thirds of its value against the US dollar since the start of 2022.

Zimbabwe's 100 billion dollar note in 2008 

From 1 July the Reserve Bank of Zimbabwe's main interest rate was raised from 80% to 200% a year, in a bid to deal with the rising cost of living.

Soaring inflation has piled pressure on President Emmerson Mnangagwa in a country that still remembers the economic chaos under Robert Mugabe's almost four decades of rule.

Hyperinflation forced the country to abandon the Zimbabwe dollar in 2009, and it opted instead to use foreign currencies, mainly the US dollar.

During the worst of the crisis the government stopped publishing official inflation figures but one estimate put the inflation rate at 89.7 sextillion percent year-on-year in mid November 2008.

At the time, the one hundred billion Zimbabwe dollar bank note was seen as an emblem of the nation's collapse.

The local currency was reintroduced a decade later but it has rapidly lost value again.

Source: The Guardian / Reuters