The cryptocurrency market crashed on Tuesday 8th of November after the news that the world’s largest cryptocurrency exchange, Binance, will take over one of its main competitors FTX, which is facing a liquidity crunch. According to CoinDesk, bitcoin hit a 365-day low today — at the moment, its price dropped to $17,484, but later the rate partially recovered. Ethereum collapsed even more, and other cryptocurrencies fell as well.
However, Binance has decided not to buy another major crypto exchange, FTX, which is experiencing a “liquidity crisis”. Reuters writes about it.
On Tuesday morning, FTX owner Sam Benkman-Fried wrote a letter to his employees: “I’m sorry. I screwed up.”
The reason for the problems FTX Reuters names, in particular, is that the owner of the crypto-exchange decided a few months ago to save other crypto-platforms from a collapse amid the loss of value of the main cryptocurrencies due to rising interest rates. However, some of those deals involving Fried’s firm, Alameda Research, resulted in a series of losses that ended up being disastrous, people familiar with the company said.
The situation reminded many investors of the recent collapse of Celsius, and they rushed to secure assets, adds the founder of TTM Group. “As a result, Solana, associated with FTX and Alameda Research, lost more than a third of its value in a day,” the expert explained. On the situation around FTX – and it has just begun to develop – bitcoin can fall to $15 thousand, and up to $10 thousand, depending on what kind of skeletons are hiding in Alameda’s closet and how the collapse of FTT and the sale of FTX will affect Alameda’s investments in many projects, says Mr. Nekrasov.
On Wednesday, crypto giant Binance pulled out of the deal and left the future of FTX in limbo. It is noted that Binance abandoned its plans to acquire FTX after due diligence. The company was also embarrassed by the latest news about FTX misappropriating investor funds and likely investigations into the actions of the exchange by the United States.
The day before, investment firm Sequoia Capital told investors that it now values its investment in FTX at $0.00. In 2021, the company acquired a stake in the exchange for $213 million, when FTX was valued at $25 billion.
The Bitcoin exchange rate on Wednesday collapsed by 14%, the cryptocurrency ended trading below $16,000 for the first time since the end of 2020. During trading on Thursday, bitcoin rises in price by 3.6%, to $16,355.
“The market is now in a state of total panic,” said Zerocap chief investment officer John de Wet. “The situation is getting out of hand.”
Cryptocurrency exchange Binance pulls out of FTX deal
Stuck without a buyer, Benkman-Fried is now looking for alternative sponsors. After Binance pulled out of the deal, he told FTX staff that Binance had not previously informed them of any clauses on the deal and that he was “exploring all options.”
News of a liquidity crunch on FTX, which was valued at $32 billion in January with investors including SoftBank and BlackRock, has impacted crypto prices around the world. The value of the major cryptocurrencies plummeted, with bitcoin falling to its lowest level in almost two years, further hurting the sector, which has fallen in value by about two-thirds this year as central banks ramped up lending.
By pulling out of the deal, Binance also avoided the regulatory scrutiny that would likely accompany a takeover. Financial regulators around the world have issued warnings to Binance for operating without a license or violating money laundering laws. The US Department of Justice is investigating Binance for possible money laundering and violation of criminal sanctions. Reuters reported last month that Binance has helped Iranian firms trade $8 billion since 2018 despite U.S. sanctions, part of a series on the exchange’s compliance with financial crime laws.