Listen to yourself.
Even if you go to a bank branch, large withdrawals ($100k+) need to be announced days in advance, they will not give you the money on the spot.
Making matters worse, cryptocurrency is not a bank branch. Large transactions can happen on-chain without announcing anything to anyone, the bottleneck only hits once you try liquidating funds you don't own. Maybe you're right, and FTX has fallen on some bad times. Whatever the case may be, this is entirely their problem and one of many hundred issues that crop up when you create custodial crypto systems. I hope they continue to fail and remind everyone how P2P currency is meant to be distributed.
If business is going as usual, customers don't see anything, because hot wallet funds are kept at acceptable levels. Not too high, because you don't want to have too much funds online in a case a hack happens. Not too low, because you want customer withdrawals to function. However, if some kind of panic happens and people start withdrawing a lot at once, then you will always have delays, assuming that you have a sane system.
Hint: if it's more than 1 block (~10mins) you're either incompetent or fraudulent
Exchanges simply don't work. The comparison between them and banks ignores the surrounding regulation and guarantees that banks are obligated to issue you. Are my FTX holdings FDIC insured?
It's not that simple. Operate enough against the user's and you'll find yourself indicted. Not being regulated doesn't mean it's a free for all and you can just take the money.
Exchanges arose because pure P2P currency distribution is impractical. Crypto's assumptions about whether, how, and why currency should be decentralized are fundamentally at odds with human behavior.
This is closer to you writing a check and it bouncing not because you don't have enough money in your account but because your bank doesn't have enough money to settle the transaction.
If lot of people are withdrawing at once, it would cause minor inconvenience to any exchange. They have to transfer funds from cold storage, and that takes time. It is almost impossible to determine if an exchange is solvent or not until you know their cold storage addresses.
Yet, no communication from FTX or SBF.
this is the biggest issue. if they are having any kind of technical issues they should be on top of it.
even if everything is fine by tomorrow and withdrawals are working again, this radio silence is unprofessional and at this point it feels like they are trying to avoid saying anything that will be held up in court against them.
Update, FTX is insolvent: https://twitter.com/cz_binance/status/1590013613586411520
I think this is a good thing. Companies overleveraging themselves like this _should_ be punished or at least have the risk of this happening hanging over them. FTX tried to create an infinite money machine, it didn't work. They aren't innocent victims here
Like all other financial institutions, they can process only certain amount of withdrawals in a time frame, limited by their banking partners and so on. Currently their are under enormous pressure, as their competitor Binance has decided to dump very large amount of $2B FTT token they received as part of the exit from FTX equity round where they were a seed investor. This will put FTT price under pressure and people correlate this price with the integrity of FTX. Also, FTX associated entities have loans collateralised by FTT tokens, so if the collateral value falls too much the loans are liquidated. Based on the FTX user agreement, this should not have effect on user deposits, but might have negative effects on other FTX associated entities like Alameda the quant trading desk.
The fear is causing everyone to withdraw from FTX and this has then clogged their withdrawal capacity.
Generally, if Binance would not have been hostile, they could have dumped their FTT tokens with less effect on the markets. They chose not to do so and telegraphed their dump very openly. This does not reflect well on the crypto industry as general. We will find out very soon.
Note that this kind of issues do not happen on decentralised exchanges (DEXes) where any reserves are transparent and smart contract controlled.