The cryptocurrency market is notorious for dramatic shifts, roller-coaster prices, and wealth that come and go fast. Even by crypto norms, what occurred this week was out of this world.

The collapse of FTX, one of the world’s largest cryptocurrency exchanges, may appear dull or complicated to non-crypto enthusiasts, the type of article you’d easily scroll over on your way to reading about Elon Musk’s latest Twitter.

The 2008 collapse of Lehman Brothers, which caused a global financial crisis and made it known to laypeople exactly how much trouble  Wall Street was in, is being referred to as the cryptocurrency industry’s “Lehman moment” in the crypto space.

In fact, FTX’s demise, which included a failed attempt to sell itself to the rival cryptocurrency exchange- Binance, may end up being the year’s most compelling crypto story. It has a dramatic twist with duelling billionaires, sabotage rumours, and high-stakes conflicts over the industry’s future. For one of the most well-known figures in the cryptocurrency industry, it is a shocking and unexpected fall from favour. Furthermore, this implies that the industry, currently bleeding from a devastating year of losses, could be facing even more challenging circumstances.

However, understanding some of the intricate backstories that led to this point. Here’s a quick rundown:

The two exchanges Binance and FTX are where the most of cryptocurrency trading takes place globally. Binance, the larger of the two exchanges, is led by Changpeng Zhao, also known as CZ in the crypto community. Binance’s business is kind of mysterious, as it has no formal headquarters and has had run-ins with authorities and regulators in many of the countries where it operates, but the company has been incredibly successful, dominating about half of the cryptocurrency exchange market.

Sam Bankman-Fried, a 30-year-old American millionaire and big Democratic supporter, runs FTX, which has its headquarters in the Bahamas. At the time of its most recent round of fundraising, it was valued at $32 billion. In the United States, FTX is also more well-known than Binance, thanks in part to millions of dollars spent on Super Bowl advertisements, naming rights for sports venues (the Miami Heat play at FTX Arena), and expensive conferences attended by celebrities like as Bill Clinton and Tom Brady.

FTX is also thought of (or was) as one of the “blue chip” companies in the cryptocurrency industry, the type of reliable, well-capitalized company that continued to operate despite the fact that rest of the market was falling apart. In reality, it was seen by investors as a grown, responsible company that didn’t participate in unsafe, speculative trading or gamble with users’ money since it spent a significant chunk of this year saving other cryptocurrency companies.

As a consequence of the success of FTX, Mr. Bankman-Fried, also known as SBF, has achieved great fame and has become something of a spokesperson for the whole cryptocurrency industry. He has been establishing a reputation as the law-abiding crypto entrepreneur. He is an offbeat, humble techie who has frizzy, untidy hair with cargo shorts. 

Mr. Bankman-Fried and FTX started pushing on Capitol Hill this year as the business came under investigation in Washington, spending millions to persuade lawmakers who were dubious and secure the pathway of crypto-friendly regulations. There has been disagreement about these lobbying acts.

One among those opposed to FTX’s lobbying acts was CZ.  He used to be acquainted with Mr. Bankman-Fried since Binance had invested in FTX early on and had acquired a significant amount of FTT tokens, which are the native cryptocurrency token of the exchange. Last year, Binance liquidated its investment in the company. However, when the objectives of their respective companies diverged, the two billionaires drifted apart. They are now officially in disagreement over their lobbying acts.

 According to the research, FTX and Alameda, which were technically independent companies, were in fact tightly connected.  Following the news, CZ indicated that Binance will sell its entire holding in FTT tokens, valued at around $500 million, because of “recent disclosures” concerning Alameda and FTX. The announcement caused FTT’s value to fall.

Investors withdrew more than $6 billion from FTX’s exchange during a three-day period, leaving the business struggling for funds to pay its obligations. By tweeting that “FTX is OK” and that “a rival is trying to go after us with false rumours,” Mr. Bankman-Fried attempted to reassure investors. The panic persisted, though, and on Tuesday Mr. Bankman-Fried announced that he would sell his company to CZ and Binance (except from the part that is US-regulated and is known as FTX.us) after failing to secure a rescue from private investors.

Binance altered its mind and announced its withdrawal from the agreement on Wednesday, stating that after reviewing the company’s finances, it determined that FTX’s “issues are beyond our control or capacity to help. On Twitter, where both CZ and Mr. Bankman-Fried are active, all of this transpired in real-time. Employees and investors at FTX sought to make sense of what had transpired while crypto Twitter reeled from the news of the company’s collapse. In a letter to investors, Mr. Bankman-Fried apologised for not taking better precautions. Later in the event, CZ twittered”Never use a token you invented as collateral. Many concerns regarding the future of cryptocurrencies are raised by the sudden collapse of FTX.

First and foremost, what will happen to FTX’s users and their funds? Deposits on crypto exchanges, unlike ordinary bank accounts, are not protected by the government, and there are worries over whether FTX has enough assets to keep its existing users good. Investors could be forced to battle for their money, or what’s left of it, through the courts if the company declares bankruptcy, as cryptocurrency companies Voyager Digital and Celsius Network did this year.

Second, is the regulatory future of cryptocurrency in doubt? After all, FTX was one of just a few U.S. crypto businesses that had extensively engaged in lobbying, and Mr. Bankman-Fried was considered the “righteous person” with the best chance of convincing lawmakers of the importance of crypto. These initiatives now seem to have at best halted, giving authorities who wish to describe cryptocurrency as an “out-of-control” one more example to use in their case. 

Third, would the fall of FTX trigger a larger market failure? The word has circulated throughout the cryptocurrency industry. Bitcoin and Ether prices also declined on Tuesday, as did the price of Solana (a cryptocurrency backed by FTX). It could take some time before we fully understand the magnitude of the damage, considering how closely FTX was tied to the rest of the crypto ecosystem.

Last but not least, what will happen to Mr. Bankman-Fried? The days of Mr. Bankman-Fried being a crypto mogul may be over. For cryptocurrency investors, the more important question is whether his business was extremely unstable or if it was simply the first to crumble.