FTX was once the second-largest cryptocurrency exchange, but now it has filed for bankruptcy showing a huge hole in its books.
- Financial Times had acquired FTXs balance sheets which said the exchange had over $1.4B in Bitcoin liabilities with $0 of Bitcoin in its reserves. This means that there were over 80,000 Bitcoins said to be held on FTX – which in reality were just an IOU.
- This is 80,000 BTC that was thought to be owned by users on FTX which has now disappeared as it was never there in the first place. So when a user would want to cash out their Bitcoin – FTX would then go purchase the amount of Bitcoin they wanted to withdraw.
- Since FTXs fallout, CoinTelegraph found that over $3B worth of Bitcoin had left exchanges – this is a great outcome from an unfortunate situation. The more Bitcoin is taken off exchanges, the less room there is for exchanges to issue paper Bitcoin IOUs Bitcoin Magazine reports.
- Bitcoin is in its 4th halving cycle, the issuance of new Bitcoins every year currently sits at around 328,000 based on 900 daily Bitcoins being mined. This means that FTX should have had around 0.41% of all Bitcoins and should have purchased around 24% of Bitcoins issued in the last year.
- Along with Bitcoin, FTX also lied about having over $671M in Ethereum – around 560,000 Ether and over $796M in the stablecoin Tether. This inflated the paper supply of these coins beyond their chain supply.
- It is now vital that exchanges release their holdings, to prove that the assets are there. Many exchanges have vowed to provide a Merkle Tree Proof of Reserve such as Binance, CryptoCom, and KuCoin.
See Related: From Bad To Good To Worse: The Binance And FTX Saga
