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Thursday, December 1, 2022

Billions of dollars seem to have disappeared with the collapse of FTX. How does that even happen? | Market Insider

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Sam Bankman-FTX Fried’s collapse has destroyed billions of dollars in customer funds and shattered the faith of a market that was already suffering from a protracted and painful slump.

Billions of dollars vanished overnight as a result of the collapse of the FTX cryptocurrency exchange. Although the catastrophe is being compared to Lehman Brothers, Lehman had genuine assets worth more than $600 billion that could have been saved. FTX, on the other hand, holds assets in unprofitable and illiquid cryptocurrencies. Many people are wondering what occurred and how a company with billions of dollars in assets one day can go entirely bankrupt the next as the dust settles and inquiries mount. The value of cryptocurrencies is, by nature, generated only from the speculative judgments of traders and investors eager to purchase and sell tokens. While there are some helpful historical analogies to refer to, none of them give a full picture. I’m done now. It has no relationship to anything supporting the actual economy, no underlying asset or cash flow, and no business profits that determine its price per unit. But for the time being, it’s helpful to at least think about the historical comparisons to show what’s happening and how money in the crypto realm might just “vanish.”



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