FTX: Cryptocurrency market in near-collapse

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Image Source: Bitcoin News

The near collapse of FTX, one of the biggest cryptocurrency exchanges in the world, has shaken the market for digital assets.

After many withdrawals caused FTX to run out of cash on Tuesday, it made a deal to get help from a more significant competitor, Binance.

FTX’s financial health concerns have led to $6 billion (£5.2 billion) in withdrawals in just three days.

Binance says that, pending due diligence, it has agreed to buy FTX’s non-US business.

Sam Bankman-Fried, FTX’s founder, and Changpeng “CZ” Zhao, who runs Binance, are two of the most influential and well-known people in the cryptocurrency market. They are also rivals.

Part of the pressure on FTX came from Mr. Zhao, who tweeted on Sunday that Binance would sell its FTT digital tokens.

Mr. Zhao tweeted on Tuesday, “FTX asked for our help this afternoon. But, unfortunately, there is a big shortage of cash.”

Binance said it signed a letter of intent to buy the company but could back out of the deal at any time.

Sam Bankman-Fried is a well-known figure in the cryptocurrency world, which is full of them.

Cryptocrash

Since the “cryptocrash” in the spring, the outspoken owner of FTX has been a sign of hope for investors of all sizes.

Even though other businesses have failed, Bankman-Fried seemed to be doing well.

In the last six months, the 30-year-old had given large rescue packages to troubled companies and made lucrative secured acquisitions. He also gave high-profile interviews with the media.

Reporting by CoinDesk showed that his company’s finances were in bad shape. Now, those honest interviews are coming back to bite him.

Now, it looks like his company has joined the growing number of cryptocurrency businesses that have failed due to a problem that keeps coming up: needing more cash on hand.

FTX is not the first company to fail because of the current “crypto winter,” but it is by far the biggest.

The news sent shock waves through the market for digital assets, causing them to drop sharply.

Bitcoin lost more than 10% of its value, reaching its lowest level since November 2020.

At the same time, the stock market value of the online trading platform Robinhood fell by more than 19%. And the value of the cryptocurrency exchange Coinbase fell by 10%.

Binance backed out of deal to bail FTX

The largest crypto exchange in the world, has backed out of a bailout deal with FTX, a smaller exchange.

Binance said it would not go through with the deal after doing its research.

It said that reports of “mishandled customer funds and alleged US agency investigations” had influenced its decision.

There had been a lot of withdrawals from FTX’s platform, which caused a “liquidity crunch.”

FTX’s financial health concerns have led to $6 billion (£5.2 billion) in withdrawals in just three days.

The US Securities and Exchange Commission (SEC) looked into how FTX handled customer funds and how it lent out cryptocurrency, Reuters reported on Wednesday.

The market regulator checked to see if the platform had kept customers’ assets separate as required by securities laws and if it had traded against customers.

After Binance backed out of the deal, Bitcoin fell below $16,000. It then gained some ground, but shares of cryptocurrency exchange Coinbase fell by more than 9.5%.

Sequoia Capital, a venture capital firm, said it would write off all of its more than $210 million investment in FTX. Because the cryptocurrency exchange is in danger of going bankrupt.

More and more cryptocurrency businesses have failed because they need more cash.

The SEC and other regulators have been looking into the industry as concerns about how crypto platforms trade grow. This has added to the pressure.

Read Also: Opinion: Crypto can’t rely on the government 

This year, a subsidiary of the cryptocurrency company BlockFi agreed to pay a record-high fine to settle charges.