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What happened to Bitcoin this week??




It has been a crazy week in the crypto space with the news of the FTX meltdown forcing major crypto assets such as Bitcoin and Ether down almost 20 percent. In order to understand what is happening, you need to know the two major protagonists in this saga.


In the left corner, we have Sam Bankman-Fried (aka SBF), the vegan billionaire who lives in a penthouse in the Bahamas with 10 roommates and drives a blue Toyota Corolla. He founded a Bahamian cryptocurrency exchange in 2019. In the right-hand corner, we have Changpeng Zhao (also known as CZ). CZ, whose exact age is not known but is estimated to be between 44 and 45, is the co-founder and CEO of Binance, the world's largest cryptocurrency exchange by trading volume. Estimated by Bloomberg to be the world's 30th richest person, he once worked at Mcdonald's and has been known to give away Lamborghinis.


CZ purchased a 20 percent stake in SBF's exchange 6 months after it was formed, and pretty soon SBF started to get annoyed by the big brother looking over his shoulder all the time. In 2021 SBF bought back the 20 percent stake - a portion of which was paid with FTT - the crypto token of FTX whose value has subsequently plummeted on the back of recent events. SBF is quite the political animal and in 2020 rumors started to circulate that SBF was lobbying his connections in Washington against Binance and was even funding negative media articles against Binance. A number of Reuters articles were harshly critical of Binance and CZ and even went so far as to target CZs children. This fuelled the bad blood between the crypto moguls. In early November of this year, a story broke on CoinDesk revealing the balance sheet of Alameda Research, which is another SBF company. The balance sheet revealed that a significant portion of the balance sheet was made up of FTT. On the back of this, CZ decided to sell Binance holding in FTT which lead to a collapse in the coin price and a run on FTX. Panic spread as FTX clients scrambled to sell their FTX tokens. By Tuesday 8 November a total of $6 billion in FTT tokens had been sold and SBF went out scrambling for a liquidity bailout. It is rumored that one of his first calls was through to Elon Musk but he did not bite. But then a very unexpected white knight appeared in the form of CZ, who was now unofficially anointed as the godfather of crypto. CZ came out with the following announcement: this afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI (letter of intent), intending to fully acquire FTX.com and help cover the liquidity crunch. We will be conducting a full DD (due diligence) in the coming days. After a few days, CZ walked away from the deal saying the issues are beyond their control or ability to help. It is believed that FTX has an $8 billion black hole it needs to fill. All these events are an early Christmas gift for Bitcoin haters. Jesse Powell, the head of Kraken, the world's third most liquid crypto exchange did not mince his words when commenting on this meltdown. He said FTX and SBF are clowns and con artists and blamed the exchanges downturn on "recklessness, greed, self-interest, hubris, and sociopathic behavior". He adds that this contagion is expected to spread, as it did when Terra and Luna collapsed. Terra was a stablecoin. There were several forces at work that lead to its demise. The first is the mechanism behind Terra and the second was general market panic. The crypto market remains vulnerable and on edge for two reasons. What other crypto projects will go bust in the next few months and what is going to happen on the macro stage such as the supply of gas to Germany over the winter? So brace yourself for more volatility but don't let these downward swings cause you to take your eye off the long-term positive narrative for Bitcoin.

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