On Tuesday, the CEO of Binance, Changpeng Zhao, popularly known as CZ, said that the firm had entered into a non-binding deal to acquire FTX. CZ said that FTX had reached out to Binance seeking help to process withdrawals after a liquidity crunch.
Doubts on the FTX-Binance deal
Cryptocurrencies have extended their price decline. In the last 24 hours, Bitcoin has dropped by 11%, trading at around $17,550 at the time of writing. The broader cryptocurrency market cap has also dropped to below $900 billion. The majority of altcoins are also trading in the red today.
The market seems to be reacting to the news of the insolvency of one of the largest cryptocurrency exchanges, FTX. The liquidity crunch facing FTX comes after CZ said that Binance would be liquidating its entire FTT portfolio because of “recent revelations.”
Binance’s news of possibly acquiring FTX is good news for traders that cannot withdraw money from the FTX exchange. However, the market is now in turmoil because the deal between the two exchanges is non-binding. Binance can easily pull out of the deal if it finds the FTX financial gap too big to cover.
The token issued by the FTX exchange, FTT, has been the greatest loser during this fiasco, dropping by nearly 75% in the last 24 hours. At the time of writing, FTT was trading at $4.38.
The woes surrounding the FTX exchanges come after a feud between CZ and the CEO of FTX, Sam Bankman-Fried. The news that Binance would be liquidating its FTT portfolio came shortly after a report that Alameda, a sister company of FTX, held many FTT assets in its balance sheet, weakening its financial position. These factors triggered a bank run into FTX.
A day before Bankman-Fried announced the deal, he had assured his Twitter followers that the assets on FTX were fine and that the exchange would process all withdrawals.
1) Hey all: I have a few announcements to make.
Things have come full circle, and https://t.co/DWPOotRHcX’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for https://t.co/DWPOotRHcX (pending DD etc.).
— SBF (@SBF_FTX) November 8, 2022
The terms of the deal between Binance and FTX are limited. According to CZ, FTX reached out to Binance for help after a “significant liquidity crunch.” Neither the Binance CEO nor Bankman-Fried has issued a follow-up announcement regarding this deal.
Solana is another token that has been greatly affected because of the liquidity issues faced by the FTX exchange. Solana is down 33% in the last 24 hours, trading at $18 at the time of writing. Solana is now down 92% from its all-time highs.
Fall of crypto giants this year
This year’s bear market has seen several projects and companies in the crypto space go under. In May, Terra Luna, once a top-ten crypto by market cap, collapsed to $0 after the TerraUSD stablecoin lost its peg.
The collapse of Luna caused ripple effects across the industry, with Three Arrows Capital, a crypto hedge fund that had heavily invested in LUNA, filing for bankruptcy shortly after. Celsius, a crypto lending platform, also halted withdrawals before filing for Chapter 11 bankruptcy. The other crypto companies that have gone under this year include Voyager and Vauld.
- 11 New Upcoming Coins to List on Binance in 2022
- Binance Agrees To Buy FTX, What Will Happen To FTX’s NFTs
Dash 2 Trade - New Gate.io Listing
- Also Listed on Bitmart, Changelly, LBank, Uniswap
- Collaborative Trading Platform Token
- Featured in Bitcoinist, Cointelegraph
- Solid Proof Audited, CoinSniper KYC Verified
- Trading Community of 70,000+ Members