Remembering FTX: How the collapse shaped crypto’s future

Tracing centralized missteps to the industry’s push for transparency and stability

article-image

Artwork by Crystal Le

share


This is a segment from the 0xResearch newsletter. To read full editions, subscribe.


Today marks two years since the eventful day FTX filed for bankruptcy. Sam Bankman-Fried is in jail for 25 years, Ryan Salame likewise for 7.5 years, Caroline Ellison just commenced a two-year jail term and the FTX bankruptcy estate is making progress.

Though the story was widely publicized across mainstream media as a colossal failure of crypto writ large, that was never actually true. The specific areas of failure in the FTX debacle were in fact the kinds of centralized institutions that cryptocurrency was designed to upend. 

Recall the commingling of funds — about $14.6 billion of FTX’s native FTT token — between FTX and its trading arm, Alameda Research. When the value of FTT plummeted, Alameda’s loans that were borrowed against FTT effectively fell underwater.

At the same time, Alameda also held an outstanding loan of 20 million MIM (the stablecoin of Abracadabra protocol) against $5 million FTT.

Source: Abracadabra

Alameda fully paid that debt as FTT cratered on Nov. 9 — two days before FTX filed bankruptcy — to avoid automatic smart contract liquidations. In sum, DeFi worked.

Today, Abracadabra seems to be pretty much dead. Its MIM stablecoin still has a market cap of about $44 million, but hasn’t seen any growth since FTX’s collapse.

Abracadabra’s founder, the infamous Daniele Sesta, has apparently moved on from his once popular “Frog Nation” cult to…memecoins on the Sonic (previously Fantom) chain. The Abracadabra-affiliated project Wonderland, which at one point passed more than $2 billion in TVL, was also stealth-rebranded into a lending protocol, Volta, in late 2023. The move occurred after the project was scandalized with news that its pseudonymous treasury manager turned out to be Michael Patryn, the previously convicted co-founder of the failed Canadian crypto exchange QuadrigaCX.

Today, Abracadabra and Wonderland have turned out to be just another series of ghost projects in the ethereal graveyard of crypto’s history.

When FTX collapsed, there were concerns that Binance would effectively monopolize the centralized crypto exchange market. At that time, its BUSD stablecoin was the third largest, and BNB Chain was also the second biggest L1 by TVL.

Today, Binance retains its position as the largest global cryptocurrency exchange, but fears of a “monopoly” haven’t come to pass.

The BUSD stablecoin was deprecated after the New York Department of Financial Services (NYDFS) ordered its closure in February 2023. Binance then switched to a little known stablecoin, FDUSD, for stablecoin liquidity on its exchange, which has seen growth from $350 million to about $2.3 billion today. 

As for BNB Chain, it’s still fourth by TVL, overtaken only by Solana’s meteoric rise in the past year.

Under FTX Ventures, SBF was also a major investor in dozens of crypto projects. Some of these included LayerZero, Yuga Labs, Near, as well as MoveVM chains like Aptos and Sui — whose mainnets weren’t yet launched — and of course, Solana.

FTX’s large token holdings cast a looming shadow over the future of these projects. Today, most of these projects seem to be doing just fine.

Finally, a post-FTX crypto industry quickly consolidated around the standard of “proof of reserves” as a minimum security standard for centralized crypto product offerings, as seen in newer efforts like Coinbase’s cbBTC or Kraken’s annual audits.

The failure of FTX undoubtedly set the industry back. But two years out, it seems like crypto has at least learned a few lessons.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Flashnote Template Presentation (2).jpg

Research

With the recent election, it’s clear that there will be a meaningful shift in crypto regulations and legislation. Trump is likely as pro-crypto as a president can be. He launched (multiple) of his own NFT collections and is launching an Aave wrapper called World Liberty Fi. He has also spoken out and mentioned that he wants to make the United States "the crypto capital of the planet" and transform it into the "Bitcoin superpower of the world". He proposed creating a strategic national Bitcoin stockpile alongside support from Senator Cynthia Lummis, promising to retain 100% of all Bitcoin held by the U.S. government. More importantly, we’re likely to see deregulation across the board in a lot of industries, with crypto being one of them - as Trump has committed to keeping the crypto market largely unregulated. Crypto, DeFi in particular, has historically been knee-capped by overreaching and hostile governmental agencies and regulation by enforcement, as evidenced by the plethora of Wells notices and lawsuits over the past few years. With Donald Trump winning the presidency, Republicans taking control of the Senate, and being on the verge of securing the House, we think it’s likely that crypto realizes positive regulatory clarity. Below, you can find our analysts’ takes:

article-image

Solana is the crowd favorite to potentially flip Ethereum somewhere down the line, and it tends to feel realistic at times

article-image

Of course, a lot has happened since the 600+ survey respondents shared their thoughts between Aug. 15 and Oct. 1

article-image

AI’s future shouldn’t be decided by a handful of tech giants

article-image

A look at software wallet Exodus may show how an SEC shakeup could have a real impact on industry companies

article-image

Co-chairing Trump’s transition team to help fill administration positions is Cantor Fitzgerald CEO Howard Lutnick

article-image

Reflect is a delta-neutral currency protocol that lets tokens accrue yield without touching the banking system