“Too big to fail” is a typical quote in the traditional financial system but the same statement seems not to hold in the strange new frontier of crypto. The collapse of the leading industrial legendaries and deeply ingrained entities such as the Terra blockchain project and Three Arrow Capital already gives us a sign of warning. Not long after, We have embraced another crypto world’s “Lehman moments.” - The destructive crisis of SBF and his crypto exchange - FTT.

On this “Black Tuesday,” Bitcoin tanked 13% to $18,300 and fell to a two-year low. Other currencies also crumbled, with the second-most valuable crypto token, Ethereum falling 15%, not to mention other ALT coins.

But the most astonishing tragedy must be the FTX token’s price and its market capitalization taking a dramatic hit. FTT is trading at about $5, hitting the lowest $2.5, down nearly 80% in the last 24 hours, per data from CoinMarketCap.

Considering FTX is the second largest crypto exchange in terms of trading volume, a question directly jumped out, what happened?

The crash has a lot to do with a week of public squabbling between Binance’s CEO CZ, and FTX’s CEO SBF, both of which are among the most prominent players in the industry, each capable of moving markets with just a tweet.

Here is a brief timeline of the entire story:

(2017)A star is born:CZ, whose only indulgence is mobile phones, sold his house in China to go all in Bitcoin and doesn’t own any cars, yachts nor fancy items founded Binance back in 2017 and it quickly grows to be the largest centralized crypto exchange in the world.

(2019) A new strong player entered the ground: After graduating from MIT and working at Jane Street Capital for about three and a half years, a young and ambitious man founded Alameda, a crypto quantum trading firm, and then launched FTX, making it another world-renowned crypto exchange with his strong integration abilities and comprehension of politics.

(2019)Cooperation Reached:Not long after the launch of FTX, Binance announced its strategic investment in FTX, stating FTX will also help build out the liquidity and institutional product offerings across the Binance ecosystem, including its exchange. ** **

(2021)Binance divest from FTX: Binance gave up its equity stake in FTX before the exchange's record $900 million fundraise in July 2021: “We’ve seen tremendous growth from them, we're very happy with that but we’ve exited completely.” CZ explains the withdrawal as part of “a normal investment cycle” and says it was completed on good terms: “We're still friends but we no longer have any equity relationship.”

(2022)Twitter Feud: The relationship between the two started to wither. The two billionaires have been hurling snarky remarks at each other for several months,CZ made a decision to sell US$530 million in holdings of FTT triggered by ‘recent revelations’ amid rumors about FTX’s balance sheet,while SBF continued to dismiss ‘false rumors’ and declared the safety of the assets.** **

(Now)Withdrawal crisis: Social media contents have triggered concern that the balance sheet of FTX's corporate sibling, Alameda Research, was too heavily reliant on illiquid tokens including FTX's own FTT and FTX's finances. Users are starting to panic and withdraw assets from FTX/8. Nansen reported that FTX users had withdrawn $1.2B worth of Ether and ERC-20 tokens from the exchange over the last 24 hours.** **

This is a fatal hit for SBF - the once-beloved "J.P. Morgan" of crypto – who was touted just months ago for his efforts in backstopping bankrupt blockchain businesses like BlockFi and Celsius. And with a net worth of nearly $17 billion, Sam Bankman-Friedman is on the list of the 100 wealthiest people at only 30 years old. But crypto users' attitudes also started to tweak when they noticed something unusual was happening.Sam Trabucco suddenly announced he will resign as co-CEO of Alameda Research in August followed by Brett Harrison announced on Twitter that he would be stepping down from his role as president of FTX US and moving to an advisory role. 

** **And SBF‘s attitude towards crypto regulations has also brought some negative comments to him. These proposals were met with SEVERE backlash from the crypto industry, with many claiming that SBF was trying to kill DeFi & push for regulatory capture.

Just like how dominoes collapsed, the liquidity crunch is the straw that broke the camel's back. SBF finally turned to Binance, saying he had asked Binance to step in, aiming to “clear out liquidity crunches” and cover assets on a 1:1 basis.

Binance, the world’s largest cryptocurrency exchange, said that it had reached an agreement to buy its competitor FTX. The two entities entered a non-binding letter of intent, to help FTX overcome an apparent liquidity crunch. CZ said on Twitter that the deal came together rapidly to “protect users” and the value was not revealed.

So what does this mean for crypto industry participants, retail users, and industrial practitioners? The obvious risk is that FTX was declared insolvent. At this point, that would be catastrophic for the crypto industry, given the size of FTX, putting their customer funds at risk..The severity has already been reflected in the market crash. Considering we are now in a bear market, the loss of confidence may cause it to take longer to recover. This might also cause a chain reaction because all the crypto organizations are closely related. In face of such threats and challenges, no one can manage alone or stand aloof.

No wonder the risk has already delivered a crippling, if not fatal, blow to crypto.And crypto is never too big to fail.

**

**

“Too big to fail” is a typical quote in the traditional financial system but the same statement seems not to hold in the strange new frontier of crypto. The collapse of the leading industrial legendaries and deeply ingrained entities such as the Terra blockchain project and Three Arrow Capital already gives us a sign of warning. Not long after, We have embraced another crypto world’s “Lehman moments.” - The destructive crisis of SBF and his crypto exchange - FTT.

On this “Black Tuesday,” Bitcoin tanked 13% to $18,300 and fell to a two-year low. Other currencies also crumbled, with the second-most valuable crypto token, Ethereum falling 15%, not to mention other ALT coins.

But the most astonishing tragedy must be the FTX token’s price and its market capitalization taking a dramatic hit. FTT is trading at about $5, hitting the lowest $2.5, down nearly 80% in the last 24 hours, per data from CoinMarketCap.

Considering FTX is the second largest crypto exchange in terms of trading volume, a question directly jumped out, what happened?

The crash has a lot to do with a week of public squabbling between Binance’s CEO CZ, and FTX’s CEO SBF, both of which are among the most prominent players in the industry, each capable of moving markets with just a tweet.

Here is a brief timeline of the entire story:

(2017)A star is born:CZ, whose only indulgence is mobile phones, sold his house in China to go all in Bitcoin and doesn’t own any cars, yachts nor fancy items founded Binance back in 2017 and it quickly grows to be the largest centralized crypto exchange in the world.

(2019) A new strong player entered the ground: After graduating from MIT and working at Jane Street Capital for about three and a half years, a young and ambitious man founded Alameda, a crypto quantum trading firm, and then launched FTX, making it another world-renowned crypto exchange with his strong integration abilities and comprehension of politics.

(2019)Cooperation Reached:Not long after the launch of FTX, Binance announced its strategic investment in FTX, stating FTX will also help build out the liquidity and institutional product offerings across the Binance ecosystem, including its exchange. ** **

(2021)Binance divest from FTX: Binance gave up its equity stake in FTX before the exchange's record $900 million fundraise in July 2021: “We’ve seen tremendous growth from them, we're very happy with that but we’ve exited completely.” CZ explains the withdrawal as part of “a normal investment cycle” and says it was completed on good terms: “We're still friends but we no longer have any equity relationship.”

(2022)Twitter Feud: The relationship between the two started to wither. The two billionaires have been hurling snarky remarks at each other for several months,CZ made a decision to sell US$530 million in holdings of FTT triggered by ‘recent revelations’ amid rumors about FTX’s balance sheet,while SBF continued to dismiss ‘false rumors’ and declared the safety of the assets.** **

(Now)Withdrawal crisis: Social media contents have triggered concern that the balance sheet of FTX's corporate sibling, Alameda Research, was too heavily reliant on illiquid tokens including FTX's own FTT and FTX's finances. Users are starting to panic and withdraw assets from FTX/8. Nansen reported that FTX users had withdrawn $1.2B worth of Ether and ERC-20 tokens from the exchange over the last 24 hours.** **

This is a fatal hit for SBF - the once-beloved "J.P. Morgan" of crypto – who was touted just months ago for his efforts in backstopping bankrupt blockchain businesses like BlockFi and Celsius. And with a net worth of nearly $17 billion, Sam Bankman-Friedman is on the list of the 100 wealthiest people at only 30 years old. But crypto users' attitudes also started to tweak when they noticed something unusual was happening.Sam Trabucco suddenly announced he will resign as co-CEO of Alameda Research in August followed by Brett Harrison announced on Twitter that he would be stepping down from his role as president of FTX US and moving to an advisory role. 

** **And SBF‘s attitude towards crypto regulations has also brought some negative comments to him. These proposals were met with SEVERE backlash from the crypto industry, with many claiming that SBF was trying to kill DeFi & push for regulatory capture.

Just like how dominoes collapsed, the liquidity crunch is the straw that broke the camel's back. SBF finally turned to Binance, saying he had asked Binance to step in, aiming to “clear out liquidity crunches” and cover assets on a 1:1 basis.

Binance, the world’s largest cryptocurrency exchange, said that it had reached an agreement to buy its competitor FTX. The two entities entered a non-binding letter of intent, to help FTX overcome an apparent liquidity crunch. CZ said on Twitter that the deal came together rapidly to “protect users” and the value was not revealed.

So what does this mean for crypto industry participants, retail users, and industrial practitioners? The obvious risk is that FTX was declared insolvent. At this point, that would be catastrophic for the crypto industry, given the size of FTX, putting their customer funds at risk..The severity has already been reflected in the market crash. Considering we are now in a bear market, the loss of confidence may cause it to take longer to recover. This might also cause a chain reaction because all the crypto organizations are closely related. In face of such threats and challenges, no one can manage alone or stand aloof.

No wonder the risk has already delivered a crippling, if not fatal, blow to crypto.And crypto is never too big to fail.

**

**