Founded by billionaire Sam Bankman-Fried, the rapid demise of FTX suggests that there are no safe institutions in the freewheeling and loosely regulated cryptocurrency industry.
Huge fall in Bitcoin
Bitcoin’s value has plunged sharply over the past few days as one of the industry’s biggest companies languished.
Binance, the world’s largest cryptocurrency trading platform, announced Wednesday that it is exiting a deal to acquire rival exchange FTX. The announcement comes a day after Binance announced it would acquire FTX amid a wave of customer withdrawals.
In a statement, Binance said it abandoned the trade following an audit of FTX’s books and reports that US regulators were investigating FTX for “mishandling customer funds.”
An FTX spokeswoman declined to comment. It’s unclear what will happen to the company or Sam Bankman-Fried, who has been CEO for 30 years. This Enigmatic Billionaire Defeated a Crypto Rockstar
The unraveling of the deal casts doubt on the future of one of the biggest crypto trading platforms and raises questions about the finances of its customers. There is also something to tell you.
Yesha Yadav, a Vanderbilt University law professor and former World Bank legal adviser who closely follows cryptocurrencies and financial markets, said, “If the news is really that bad on FTX, I would have a very grim prognosis. “FTX was a company surrounded by halos. If it essentially ended, that would mean bad news for customers and the industry at large – it would panic.” It will increase and cause further losses, creating a sense of existential doom.
FTX and Bitcoin
Bitcoin, the largest cryptocurrency, fell 15% on Wednesday, deepening a recent drop that began Tuesday after FTX said it was unable to handle a surge in withdrawal requests, and Binance’s trading has become a lifeline. I called looking for it. At some point Wednesday night, the price of the token hit $15,600, its lowest level since November 2020, before rising again.
“Initially, we hoped to help FTX clients provide liquidity, but the issue is beyond our control or ability to help,” Binance said in a statement Wednesday. FTX faced an asset shortfall of at least $6 billion to cover its debt, according to a person briefed on the matter and not authorized to speak publicly.
Is Crypto The House Of Cards? A Peek Behind A Volatile Industry
According to experts, the past 24 hours of whiplash (rescue efforts and subsequent retreats) greatly reduced the chances of another suitor intervening. “It’s very damaging and makes a deal much less likely,” said Joe Castelluccio, a merger and acquisition expert and partner at Mayer Brown, a New York law firm that specializes in digital assets. “The chances of FTX getting through this without liquidating are suddenly much smaller.”
Cryptocurrencies skyrocketed in value during the pandemic, creating a string of instant millionaires. But when the Federal Reserve signaled it would raise interest rates to combat inflation a year ago, investors fled risky assets like cryptocurrencies and prices plummeted.
The market catastrophe got worse in May when Terra and his buddy, his project called Luna, crashed, setting off a chain reaction of corporate failures. Terra and his FTX are very different entities, but he has one thing in common. Both rely on volatile digital tokens.
FTX owner Bankman-Fried’s wealth
The sale of his FTT token issued by FTX caused panic among customers and led to a crisis. The events of this week have caused Bankman-Fried’s wealth and political influence to grow even faster than he has amassed in recent years. His net worth, which has risen to an estimated $26 billion, was $15.6 billion earlier in the week, according to the Bloomberg Billionaires Index. But that figure is closely tied to his holdings in his FTX and his trading firm, Alameda, his research, and those implosion vaporized his 94% of his wealth. I was allowed to. The entire Ladder Billionaire Club.
— CZ 🔶 Binance (@cz_binance) November 9, 2022
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