FTX Trading, the third-largest cryptocurrency exchange, is experiencing a liquidity crisis. After Binance backed out of a potential fire-sale transaction, FTX’s CEO Sam Bankman-Fried has been scrambling all week to find investors to make up for a liquidity shortfall of as much as $8 billion on the cryptocurrency exchange.
What are the implications for cryptocurrency prices if fear, uncertainty, and doubt (FUD) can eliminate FTX?
Nic Carter, general partner at Castle Island Ventures and co-founder and chairman of Coin Metrics remarked:
“Sam needs to abandon his delusions of cobbling together some deal. There’s no one on earth that’s going to bail FTX out, unless the Fed is inclined to do it. It’s just not going to happen.”
— Brandon Devries (@gethypedllc) November 11, 2022
It is possible that FTX’s investors, the VC industry, FTX’s backers, and even other cryptocurrency enterprises will suffer a messy demise. Carter warned that this situation would result in “significant victims.” Because FTX had such a strong institutional focus, many companies, particularly in emerging markets, entrusted the exchange with the custody of their funds.
Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient and we believe in time that outliers that misuse user funds will be weeded out by the free market.
— Binance (@binance) November 9, 2022
Binance Dumps FTX Due to its Financial Difficulties
Changpeng Zhao, the CEO of Binance, stated last week that its competitor, FTX, is experiencing a significant liquidity crunch. As a result, Binance planned to acquire FTX’s non-US division. However, less than 48 hours after CZ revealed his plan to save struggling rival FTX, Binance announced that it would not proceed with the purchase.
Binance stated that it changed its mind after investigating FTX’s financial situation. Because of the more than $6 billion difference between their assets and liabilities, FTX and it’s sister company Alameda Research are experiencing severe liquidity issues.
As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of https://t.co/FQ3MIG381f.
— Binance (@binance) November 9, 2022
The cryptocurrency exchange’s native token, Locked FTT, was discovered to be FTX’s most valuable asset, valued at $3.66 billion. FTT collateral was its third-largest asset, accounting for $2.16 billion. Because more than $5 billion of the company’s assets are FTT, it raises concerns about its financial stability.
Furthermore, Binance stated in a series of tweets that it would not pursue the potential acquisition of cryptocurrency exchange FTX due to claims of mishandled customer funds and reported US regulatory investigations. The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), according to reports, are investigating the possibility that the FTX exchange mishandled funds and its connections to FTX US and Alameda Research.
FTX CEO SAM BANKMAN FRIED HAS GONE BANKRUPT HE PERSONALLY STILL OWES $650 MILLION TO LENDERS.
FTX Faces Liquidity Shortfall of Up to $8 Billion, SBF Told Investors Wednesday
— Stt Breaking News (@sttbreakingnews) November 9, 2022
Following Binance’s announcement, FTX’s website unexpectedly went offline. It reappeared two hours later with a banner warning that the exchange could not process withdrawals and strongly advising users not to make deposits. The CEO of FTX, Sam Bankman-Fried, reportedly called investors and stated that the exchange needed $8 billion in emergency funding to assist with withdrawal requests and was looking to raise $3 billion to $4 billion.
FUD Can Destroy FTX
FUD is an acronym that stands for fear, uncertainty, and doubt. In the crypto world, it refers to widespread dissatisfaction with a coin or market. Rumors of FTX’s insolvency initially fueled FUD, but Binance’s CZ dumping of the FTX coin only exacerbated the situation. CZ, the founder of Binance, announced on November 6 that the exchange would begin selling all remaining FTT tokens, the native token of FTX, on its books.
According to Zhao, the transfer may take several months to complete in order to avoid market damage. Following the incident, FTX saw an 83% decrease in net crypto asset holdings, which added to a 93% decrease in the company’s stablecoin reserve and nearly zero associated withdrawals. FTX has lost 94% of its total income, or an estimated $14.6 billion, according to the Bloomberg Billionaire Index.
CarolineCapital, an Alameda crypto trader, responded to CZ on November 6 with a bid for all of the FTT Binance intends to sell. This not only resulted in extremely volatile price action, but it also had an impact on both long and short FTX token traders. Caroline stepped out to dispel the balance sheet rumors, but despite her presence, the market did not settle smoothly.
Had entire net worth on FTX, oops.
Will do a FTX victim party live from Tokyo as a Twitter Space, about 29 hours from now. See you there.
— Alex Wice (@AWice) November 9, 2022
It appears that bankruptcy is on the table, but the specifics of any potential liquidation processes are unclear. In contrast to Celsius and Voyager, two bankrupt US crypto corporations that have billions of dollars in investor cash stuck in bankruptcy processes, FTX is a global company with offices in the Bahamas and incorporation papers from Antigua and Barbuda.
In the event that FTX declares bankruptcy, its assets may be liquidated to pay off creditors. FTX clients would be considered unsecured creditors, putting them last in line for repayment if the company went bankrupt.
Given the ongoing FUD, the market is turning bearish, but there are coins in a presale that may have significant upside potential. One of them is D2T.
Dash 2 Trade (D2T)- Coin at Presale
Dash 2 Trade’s native token is D2T, and the platform’s features include on-chain research and a trading API. It will be easier for market participants to obtain up-to-date information on how to increase their earnings. Each user will have their own dashboard as well as a Dash 2 Trade account. Investors can use this dashboard to keep track of upcoming presales and new currency listings.
In addition, Dash 2 Trade has created a brand-new grading system to assist its customers in locating the best cryptocurrency presales as they emerge on the market. D2T is currently in the third stage of pre-sale, with 1 D2T worth $0.0513.
There are only 55,928,725 D2T tokens remaining until the price of one token reaches $0.0533. Following the presale, the D2T cryptocurrency is expected to begin trading on its first exchanges in the first quarter of 2023.
Attention #D2T Crew!
First #CEX listing confirmed
After the presale $D2T will be listed on @LBank_Exchange!
— Dash 2 Trade (@dash2_trade) November 2, 2022
The confirmation of its first CEX listing on LBank exchange is one of the reasons for this presale’s potential popularity. The presale will end in the first quarter of 2022, and it will then be listed on LBank.
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Dash 2 Trade - New Gate.io Listing
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