In early November, Alameda Research became insolvent. FTX tried to bail it out but faced a liquidity crisis that shortly led to its bankruptcy and marked the start of a cataclysmic meltdown in the cryptocurrency market. Here’s a brief aftermath of it in numbers:
- $223 billion was lost in the market cap for the entire crypto market in less than 5 hours.
- $15 billion was lost in total value locked (TVL) in DeFi protocols.
- $4,700 drop in value for Bitcoin in a day.
- $32 billion drop in value for FTX.
- $16 billion drop in value for FTX CEO Sam Bankman-Fried (SBF), reaching $0 in a flash.
- ≈$500 million worth of FTX tokens were lost in a potential hack within hours of FTX filing for bankruptcy.
- $3.1 billion owed by FTX to creditors.
- +1 million people allegedly lost their money in the FTX catastrophe and may never get it back.
And it doesn’t stop there. It is estimated that hundreds of DeFi projects saw their tokens stuck on FTX once the exchange froze its assets. This left them in dire need of liquidity as billions of various tokens became unavailable for withdrawal.
The effects of the FTX and Alameda bankruptcies will linger on for months to come. Meanwhile, affected projects seek innovative ways to rebalance their token supply, count their losses and move on.
Fortunately, not everything is lost. DeFi can recover, and investors will gradually regain trust in a debilitated market, but swift action is necessary. Below are three ways to happen and two DeFi projects already leading by example.
Replace Lost Tokens
Following a tweet from CZ, the CEO of Binance, liquidity concerns surrounding FTX mounted, triggering massive withdrawals from the centralized exchange. As a result, the platform became insolvent and could not pay out more than $2 billion worth of liquidity to several sources.
The probability of recovery is extremely low and proves the vulnerabilities of centralized exchanges (CEXs). These platforms operate as intermediaries between traders to ensure a secure venue for millions of daily transactions. Moreover, they provide storage options for users to have permanent access to their funds and thus transact it faster if necessary.
Unfortunately, CEXs pose a risk of sudden insolvency when, as was the case with FTX, people withdraw substantial capital amounts in a short period. Before November 2022, FTX was one of the most trusted and popular centralized exchanges. Its founder and CEO, Sam Bankman-Fried, was revered as a brilliant young tech guru worth $32 billion.
On November 11, these glorified images were turned upside down in just a few hours. FTX went bankrupt, SBF resigned and his demonstrated malpractice impacted numerous crypto projects and companies at different levels.
The UpBots Case
UpBots is one such project with 200 million UBXT, 2/5 of their tokens, in Alameda accounts. This amount included a substantial amount that Alameda borrowed to manage UpBots’ market making. Moreover, a significant part of the platform’s liquidity was on FTX.
UpBots is an all-in-one trading ecosystem allowing anyone to trade crypto, regardless of their experience or skill. The platform employs various mechanisms enabling traders to win money and save time while away from their trading stations.
The UpBots team anticipated Alameda potentially selling all its liquidity by eliminating most of the tokens it still had in the FTX bankruptcy aftermath. This way, they can preserve the company and build it without the risk of Alameda reselling the UBXT tokens and lowering the project’s value.
Furthermore, UpBots announced the launch of the UBXN token, replacing the UBXT token completely. As a result, the platform’s ecosystem can continue to evolve. The team will issue 500 million UBXN, and holders can exchange their UBXT for UBXN at 1:1.
If the users can withdraw the UBXT tokens from Alameda, UpBots will create a new swap campaign specifically for them. A snapshot was taken on November 30, 11:59 pm GMT on ETH & BSC to avoid arbitrage between UBXT and UBXN. The Swap smart contract is available as of December 1st.
UpBots paves the way for other DeFi projects to overcome the Alameda and FTX crashes. It is a good solution for this project to solve a liquidity issue. Most importantly, it can drastically reduce the risk of losing them if the custodian decides to resell them.
Mainstream Adoption of Decentralized Trading
Another way to recover from the recent crypto crash is ushering in a decentralized-oriented economy. In other words, transitioning from centralized to decentralized trading could help the crypto market avoid similar mishaps in the future.
Currently, centralized exchanges (CEX) dominate the crypto trading landscape. They act as intermediaries between traders, charge commissions, and even provide storage solutions. Unfortunately, as FTX proved it, trusting a CEX comes with considerable risks. Moreover, placing your assets in the hands of private entities like SBF and Alameda could see them vanish overnight.
On the other hand, decentralized exchanges allow traders to execute transactions securely and directly, without intermediaries. This is possible thanks to self-executing smart contracts which are electronically coded agreements.
Platforms like SuperBots use them to enable quick and effective crypto trading. Users do not have to create an account on the website to start trading. Furthermore, they only need to connect their wallets through MetaMask and perform crypto trades on the spot.
SuperBots supports decentralized trading at minimal costs. For instance, the platform does not charge membership commissions. Instead, it charges swap and performance fees only if and when the users’ trades are profitable. Even then, the fees are small compared to what most CEXs practice, but big enough to keep the system going.
Make DeFi Trading More Accessible
Another great way DeFi can recover from the Alameda solvency crisis is to open its doors to more traders and investors. Relying on centralized trading only allows a select group of crypto enthusiasts to benefit from it. On the other hand, integrating new people can help increase liquidity and accelerate the widespread adoption of crypto trading.
UpBots is an all-in-one crypto ecosystem allowing anyone to trade digital tokens, regardless of their experience or skills. The platform employs various mechanisms to help traders perform successful trades whether they are active or away from their trading stations.
To this end, the project proposes a sophisticated digital asset management system relying on algorithmic trading bots and the expertise of seasoned traders. People new to crypto can use these tools to enhance their chances of success from their first crypto trades.
Furthermore, SuperBots created comprehensive educational series on how its platform works and how to trade crypto using algorithmic bots. This way, anyone can learn decentralized crypto trading from scratch and with professional guidance.
These measures should help DeFi become more accessible to people eager to trade crypto daily. Above all, it should help the industry recover from the recent crash.
UpBots was created by a dedicated team of highly-skilled professionals from the company’s headquarters in Switzerland. Its trading ecosystem is growing and regularly adding new and more powerful partners. For example, some of its collaborators include Reserve Protocol, Covalent, Dex.AG, IDEX, and HXRO. Moreover, all its trades are 100% blockchain-based, audited, and secured by Solidproof and Immunefi.