Re:FTX Agreement with Binance
by skippyboxedhero on Tuesday November 08, 2022 @11:43AM
(#33521041)
The fact that SBF is re-tweeting stuff from the CEO of Alameda Research (his hedge fund) is also a bit confusing. It seems like the hedge fund mainly owns FTT and that is causing a doom loop - https://www.coindesk.com/business/2022/11/02/divisions-in-sa... - https://nitter.nl/i/status/1589264375042707458
I don't understand it either to be clear. I know a little about crypto, a decent amount about finance but it does seem that the problem is not limited to FTX.
This might go down as an LTCM. Would be quite nice. Haven't had nerds setting fire to the financial system for a while.
Can someone explain why FTX created their own token in the first place? Was it just a way to raise money/distribute equity without dealing with stock market regulations?
Yes, it gives you a discount on trading and can be used to buy things from FTX, and it was originally a fundraising mechanism.
Why does anyone create their own token? Once you get people using it, then you can just "print more" and make yourself incredibly rich. Creating wealth out of nothing but people like your foobar token and they will convert other tokens to/from it. You can sell it to sell fake equity (without usual oversight) in a company too.
- starting state had FTX as insolvent, but had enough money to cover the withdrawals of their token (FTT)
- Binance CEO announces that they're going to dump all of their FTT because they don't trust the stability of it
- now there's a bank run, and people are making enough withdrawals to expose that FTX is insolvent
- FTX pauses withdrawals (because they don't have the cash)
- Binance bails out FTX by purchasing it