full image - Repost: How can exchanges (like FTX) go bankrupt? (from Reddit.com, How can exchanges (like FTX) go bankrupt?)
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Naively I would think that an exchange, in its purest form, cannot just go bankrupt from one day to another. They are essentially a middleman letting people trade their own coins (Alice buys BTC for $20k that means that someone else, Bob, is willing to part from his 1 BTC in exchange from $ from Alice). All the exchange does is facilitating the trade and takes small cut per each trade.Obviously the platform needs developers and infrastructure which needs to be paid from these trading fees. But this is simple math: are the trading fees the exchange earns more than the operating costs. This is not something that changes one day to another or even one week to another. Changes are probably slow and the company can react (e.g. less trade volume means they need less hardware or less employees so they adapt accordingly).In other words: how can an exchange like FTX go bankrupt suddenly?
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