FTX was in talks two months ago to raise 1Billion equity at 32Billion valuation. Binance threatens to sell its holdings of FTX tokens and it all crumbles? How isn’t this a big Ponzi scheme?
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FTX bailed out other Many people, including economists, will tell you it IS a ponzi scheme (or pump and dump).
But basically what happened is more people wanted to withdraw money than FTX had available. It’s basically akin to a run on a bank. Banks don’t have enough cash on hand to give everyone all of it at once, or even most of it, for the most part that’s fine, people don’t usually withdraw lots of cash all at the same time, especially these days with credit cards, debit cards, digital payment, etc. but when it DOES happen a bank could theoretically borrow money from a larger bank or as a last resort the government.
FTX doesn’t have as many options for a few reasons.
First crypto is highly volatile with the value changing dramatically in a short period of time. So maybe they had enough cash on hand last week, but now say the value of a crypto currency doubles and suddenly your cash on hand is basically cut in half.
Second, the crypto economy is not nearly as big as the dollar economy, so there are fewer options for a bailout if needed.
Third, the government doesn’t back crypto. Unlike a bank, they won’t step in to help a crypto exchange or its customers if the exchange goes belly up.
At the end of the day crypto is volatile, has limited utility without being exchanged for another currency, has little history, and has very little support in case of troubles. It’s highly risky, probably a scam.
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