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Binance Pulls the Plug on FTX Deal: Crypto Market Winds Up the Second Day of Crumble Deep in the Red
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CZ-led crypto exchange Binance has withdrawn its interests in acquiring rival exchange FTX, late Wednesday reports divulge. Binance CEO Changpeng Zhao shared in a Tuesday update that his exchange company had signed a non-binding letter of intent to purchase FTX pending due diligence. CZ explained that the acquisition would help save FTX from the liquidity hole it has found itself in while protecting market users.
In a delayed update confirming the unsuccessful strategic arrangement, FTX CEO Sam Bankman-Fried apologized to users and investors for not being forthcoming on the matter. Employees of FTX and FTX Ventures, the exchange’s venture capital arm, reportedly found out about the takedown plans on social media.
FTX’s plights worsen, shattering hopes of a clot to the market-wide bleed
Earlier reports of the acquisition becoming unlikely emerged today and have been confirmed by both parties in the past couple of hours. Rumors had it that the distressed exchange mishandled customer funds, but the reason for pulling the plug is consternation after ‘corporate due diligence’ into the FTX’s ‘internal data and loan commitments’ revealed a poor state of finances.
“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,” Binance said.
The official websites of FTX Ventures and Alameda Research – two affiliated ventures established by Bankman-Fried – have since gone blank following a chaos-inspired panic wave around the exchange’s solvency issues. Bloomberg reports that regulators, including the US financial markets watchdogs, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission, are looking into FTX, which suspended withdrawals earlier this week. This probe adds to the wave of brewing hostile regulations set to land in the digital assets space soon.
Thin optimism in FTX surviving the turmoil
The now-collapsed deal adds to a concerning track of unsuccessful attempts by Binance, most notably WazirX and, recently, Forbes. Bloomberg also revealed that Sam Bankman-Fried communicated to investors in the trading platform’s unit on Wednesday, informing them that the company is likely to file for bankruptcy unless it gets a last-minute lifeline in the form of a cash injection. This bailout on the FTX deal has seen investor sentiment in crypto fall to the pits while the broader market has experienced overwhelming selling pressure from retailers.
Ignore prices and build protocols, CZ says amid continued sell-off
The cryptocurrency sector has overall extended its losses late on Wednesday, with the total market capital shrinking to $753 billion at the time of reporting. Bitcoin has dipped even lower, touching an intraday low of $15,682, while Ethereum is struggling to hold above $1,100 in a fight that is more or less futile. The rest of the altcoins have traced similar courses. Markedly, some, like Cardano (ADA), have retreated to uncharted territories.
Total crypto market capital
Polygon (MATIC) and Solana (SOL) have particularly stood out – the latter is now down to a new yearly low of $12.50. MATIC is, on the other hand, trading at less than half its price at the start of April following Wednesday’s red candlestick.
Snapshot of altcoin markets today
Technical charts all but confirm the frail state of the market going into Thursday. The notable mover at the macro-level is the US CPI read for October that could potentially set the theme ahead of the weekend. Most coins are projected to drop to further lows before calm reigns. Analysts expect Bitcoin to survive a short-term slip below $15,000, leveling the prices of altcoins in the process. Still, a series of minor dumps around this range could eventually see it take a trip further south to $12,000.
“If Binance can’t or won’t do the deal, no one will be able to swallow the losses billowing from FTX […] We will probably enter yet another high-profile bankruptcy situation where depositors queue up to recover what they can,” former BitMEX remarked on the ensuing chaos.
A short-term pullback across the board is extremely unlikely, as the urgent concern in the industry is whether FTX can find a way out of this financial muddle. The exchange company has a massive hole in its finances between assets and liabilities, estimated to be north of $6 billion.
