The second smashing in as many days for the crypto world today, with another major collapse on the cards after Binance backed out of its planned bailout of struggling FTX.
The news first popped up in market rumours, then as a report in the Wall Street Journal after 7am Sydney time Thursday, then in a statement from Binance revealing its shock about-face.
Bitcoin prices tumbled, losing another 15% or more by 9am Sydney time Thursday as investors were forced to confront the prospect of yet another – though larger- collapse of a big name in crypto – perhaps the sector’s Lehman Brothers experience, as one blogger put it.
Bitcoin fell around 15% on Tuesday and its value fell below $US16,000 on Wednesday night for the first time in more than two years.
That’s a 30% drop in just two days.
Adding to the sense of doom was a Bloomberg report which claimed FTX needed $US8 billion to save it.
That report came after Binance CEO Changpeng Zhao revealed he had unwound the earlier non-binding deal to buy the non-US assets of FTX from Sam Bankman-Fried
Bloomberg reported that FTX investors have been warned that the crypto exchange may be forced to file for bankruptcy if it doesn’t get a cash infusion.
Bloomberg reported the exchange faces an $8 billion shortfall.
Earlier this year, FTX was valued at $US32 billion by private investors, now it is essentially worthless.
The failed acquisition of the world’s fourth-largest exchange is the latest chapter in a shocking collapse that’s rocked the crypto world since May.
Bankman-Fried tried to reassure investors just this week that the company’s assets were fine. But after news emerged that Binance’s Zhao had said publicly that his company was selling its holdings in FTX’s native token FTT triggered a sell-off, FTX days were numbered.
Bankman-Fried said on Tuesday that customers demanded withdrawals totalling around $US6 billion. it’s obvious TFX could not meet those demands.
The FTT token lost 80% of its value between Monday and Tuesday, falling to $US5 and wiping out more than $US2 billion in a day. It fell by about half again on Wednesday to around $US2.50, shrinking the total value of circulating tokens to roughly $US340 million.
Binance said in a statement:
“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 FTX.com.
“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help.
“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.
“As regulatory frameworks are developed and as the industry continues to evolve toward greater decentralization, the ecosystem will grow stronger.”
Image & Story Credit: finnewsnetwork.com.au