By Helee Shukla
Artwork by Suha Tasfia
The dramatic collapse of FTX resulted in the decline of several other cryptocurrencies, like Bitcoin.
Cryptocurrency, digital currency, has been around since 1990, but gained the most traction with the introduction of Bitcoin in 2009. While some may prefer cryptocurrency because it does not require banks to verify transactions, it can also be extremely volatile. The most dramatic decline in value came this November, when the cryptocurrency market lost over $150 million.
The volatility of the crypto market is primarily driven by supply and demand; since more people are buying a given cryptocurrency and there is only a limited number of the coin available, its value increases. The market’s boom and bust cycles are oftentimes influenced by user speculation and excitement, which is most frequently seen when the cryptocurrency is first publicized and later plummets in value, which discourages some potential buyers.
“Crypto is too unpredictable for the average consumer. Since crypto can have incredible highs, it definitely appeals to the masses, but I don’t think it’s very reliable,” senior Nikson Alex said.
“This collapse rippled into other cryptocurrencies... leaving many buyers doubtful of cryptocurrencies’ safety...”
However, controversies and conspiracies regarding cryptocurrency, specifically its security, can also have a profound impact on its value, as seen in the case of the crypto-exchange platform Futures Exchange. FTX founder, Sam Bankman-Fried, had kickstarted a quantitative trading platform, Alameda, two years prior to FTX. Fried had assured skeptics that his two firms were not affiliated with one another’s interests. But Alameda's leaked balance sheet proved otherwise: the majority of its $14 billion in assets were in FTX’s token, FTT and over $10 billion was missing from the record. These revelations were subject to concern among buyers as they implied Fried was using consumer money and lending it to Alameda.
FTX’s trading volume began to steadily fall from said user apprehension. And when Binance, the largest crypto trading firm, declared it was going to sell all of the 23 million FTT coins it owned, FTT began its collapse that would result in losing over 80% of its value. This collapse rippled into other cryptocurrencies, like Bitcoin and Ethereum, which have lost almost 20% of their value, leaving many buyers doubtful of cryptocurrencies’ safety.
“Because of the recent scandals, I would do more research before investing into crypto,” senior Aman Sinha said.
“Right now, these huge firms like FTX that want to keep making more money are causing issues. I believe that transparency should be something these firms should focus on, and I think they should be more regulated so these scandals don’t happen anymore,” senior Roby Shaji said.
FTX’s depreciation can be seen as revelatory of the extent of market volatility, and will be remembered by many as a pivotal moment in crypto history. As some buyers recover from losses in investments, they look forward to increased transparency between exchange platforms and its users.