FTX’s downfall and Binance’s consolidation: The fragility of centralised digital finance
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Títol
FTX’s downfall and Binance’s consolidation: The fragility of centralised digital financeData de publicació
2023-07-16Editor
Elsevier ScienceDirectISSN
0378-4371; 1873-2119Cita bibliogràfica
Vidal-Tomás, D., Briola, A., & Aste, T. (2023). FTX's downfall and Binance's consolidation: the fragility of Centralized Digital Finance. Physica A: Statistical Mechanics and its Applications Volume 625, 129044.Tipus de document
info:eu-repo/semantics/articleVersió
info:eu-repo/semantics/publishedVersionParaules clau / Matèries
Resum
This paper investigates the causes and the consequences of the FTX digital currency exchange’s failure in November 2022. Analysing on-chain data, we report that FTX heavily relied on leveraging and misusing its native ... [+]
This paper investigates the causes and the consequences of the FTX digital currency exchange’s failure in November 2022. Analysing on-chain data, we report that FTX heavily relied on leveraging and misusing its native token, FTT, and we show how this behaviour exacerbated the company’s fragile financial situation. To gain further insights into the downfall, we employ state-of-the-art network science instruments to model the evolutionary dependency structures of 199 cryptocurrencies on an hourly basis, and we investigate tick-by-tick public trades at the time of the events. We identify the collapse of the Terra-Luna ecosystem as the pivotal event that triggered a significant decrease in the exchange’s liquidity. Results suggest that the crash was actively accelerated by Binance tweets causing a systemic reaction in the cryptocurrency market. Finally, identifying the actors who mostly benefited from the FTX’s collapse and highlighting a generalised trend toward centralisation in the crypto space, we emphasise the importance of genuinely decentralised finance for a transparent, future digital economy. [-]
Publicat a
Physica A: Statistical Mechanics and its Applications Vol. 625, (September 2023)Entitat finançadora
European Union-NextGenerationEU | ESRC, United Kingdom | EPSRC, United Kingdom | EC
Codi del projecte o subvenció
MGS/2021/13 (UP2021-021) | ES/K002309/1 | EP/P031730/1 | H2020-ICT-2018-2 825215
Títol del projecte o subvenció
Margarita Salas
Drets d'accés
info:eu-repo/semantics/openAccess
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