The fall of FTT and the ongoing Binance-FTX episode caught the crypto community by surprise. FTX was one of the most popular exchanges, and many did not expect the firm to have insolvency issues. Binance has made an offer to acquire FTX, and due diligence is awaited. Charles Hoskinson, founder, and chief of Cardano (ADA) went live on his YouTube channel to speak about the situation.
Hoskinson compared the FTX collapse to that of LUNA. He said that FTX, through a series of relationships, was more akin to LUNA than people realized. He stated,
“It looks like, whats occurred is that FTX was, through a series of relationships, closer to what occurred with LUNA, than people led on.”
The Cardano founder goes on to say that when due diligence is done, it often leads to the discovery of “uncomfortable things,” especially the financial relationship between the entity and its founders. Furthermore, he also highlighted that there is a chance that the acquisition may fail. He stated,
“There is a non-zero probability that the acquisition proposal that Binance has put on the table to bailout FTX, acquire it, will not succeed because it will fail due diligence”
Because of the scale and size of FTX, a failure would cause a chain reaction in the crypto markets. The Cardano founder also noted the fact that FTX has been actively lobbying in Washington, DC, and that its failure would alter the political climate. He claimed that more severe legislation may be passed as a result of FTX’s failure.
“This is not a minor event. This could become a very significant event.”
Nonetheless, Hoskinson does say that “if the Binance acquisition goes through, the markets could stabilize.” However, if the acquisition fails, it could lead to a series of cascading events. Other firms that were dependent on FTX might also fail.
How is Cardano fairing?
Although many major cryptocurrencies are down by double digits, Cardano (ADA) has managed to keep its losses in the last 24 hours to a minimum. While Ethereum (ETH) was down by 10.5%, XRP by 9.6% and DOGE by 11.6%, all in the last 24 hours, ADA was down by only 1.5%.
Furthermore, during the live stream, Hoskinson noted that ADA does not have any debts or connections to these entities. He said,
“Its bit of a dark comedy, but FTX actually refused to list ADA.”
Therefore the situation does not directly affect the Cardano ecosystem. However, being members of the same crypto community may affect them indirectly he said. At press time, ADA was trading at $0.374547.