The crypto world was rocked on Tuesday as one of the biggest companies in the biz agreed to buy its rival. While Binance is still doing its due diligence for FTX.com, the deal would be more of a bailout even if it goes through. There are still a load of questions swirling around, but the shockwaves from the event sent Bitcoin (BTC-USD) down by more than 10% to the $17,000 level and will likely have more consequences in the weeks and months to come. Robinhood Markets falls as FTX woes spill over to crypto
What happened? Valued at $32B back in January, Sam Bankman-Fried’s FTX received funding from the likes of BlackRock, SoftBank, Temasek, Tiger Global and the Ontario Teachers’ Pension Plan. However, under the surface, recent questions swirled about the balance sheet of sister trading house Alameda Research, resulting in an FTX liquidity crunch as customers pulled $6B worth of withdrawals over the past 72 hours. It’s a stunning reversal of fortunes for one of the most popular exchanges in the industry, given the fact that FTX and Alameda bailed out several crypto players themselves this past summer, including BlockFi, Voyager Digital and Celsius.
Flagging the apparent issues was Binance CEO Changpeng “CZ” Zhao, who said on Sunday that the rival exchange would liquidate its holdings of FTX’s token called FTT (FTT-USD) due to unspecified “recent revelations.” On Monday, Sam Bankman-Fried “SBF” dubbed the tweets “false rumors” and that FTX was “fine,” but apparently the exchange had too many of its assets wrapped up in FTT token. “Unfortunately, I don’t have a perfect answer for you, because the details are still being hashed out,” SBF wrote in a reported email to investors. “I’m sorry I didn’t do better, and am going to do what I can to protect customer assets, and your investment.”
Outlook: Is CZ’s move aimed at propping up the crypto industry? Countering broader concerns about the asset class? Just a jab at SBF? Binance’s agreement to buy FTX is non-binding, but in traditional crypto thought, it may want to consolidate during the crypto winter before things warm up again. In any event, there is a lot of explaining that’ll be done in the coming days, which is likely to trigger another call from regulators who have been disturbed about the lack of guardrails in the freewheeling cryptoverse.
Crypto movement as of 6:00 a.m. ET on Wednesday: Bitcoin (BTC-USD) -10% to $17,748, Ethereum (ETH-USD) -19% to $1,196, Binance Coin (BNB-USD) -8% to $299, Monero (XMR-USD) -12% to $130, Litecoin (LTC-USD) -12% to $56, Solana (SOL-USD) -37% to $17, FTX Token (FTT-USD) -75% to $4.15, Cardano (ADA-USD) -8% to $0.35, XRP (XRP-USD) -16% to $0.36 and Dogecoin (DOGE-USD) -19% to $0.08.
Related tickers premarket: MicroStrategy (NASDAQ:MSTR) -7%, Marathon Digital (NASDAQ:MARA) -5.7%, Riot Blockchain (NASDAQ:RIOT) -5%, Coinbase Global (NASDAQ:COIN) -4.8% and Robinhood Markets (NASDAQ:HOOD) -2%.