Bitcoin plunges as Binance walks away from FTX bailout. Is this the new crypto crisis?

[ad_1]

Cryptocurrencies across the board are taking a massive hit with Bitcoin reaching a yearly low after the third-largest crypto exchange FTX Trading is reportedly experiencing a liquidity crisis and Binance reversed its decision to bail out the struggling platform.

Bitcoin plunged below the $16,000 mark (16,000) on Thursday with other altcoins following suit. Some fear this could be the next Terra Luna saga, causing many to lose their savings in this volatile industry.

The largest crypto exchange Binance said last week it planned to buy its rival, the non-US unit of FTX, because, according to Binance CEO Changpeng Zhao, (better known as CZ), FTX is experiencing a significant liquidity crunch.

But on Wednesday, Binance said it had reversed its decision after looking into FTX.

“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,” read a statement from Binance seen by Euronews Next.

“In the beginning, our hope was to be able to support FTXs customers to provide liquidity, but the issues are beyond our control or ability to help”.

CZ said he had signed a letter of intent to buy the company, which has sent the crypto world into a frenzy with prices dipping as it appeared the possible Binance purchase was a bailout. But crypto prices have nosedived even further with Bitcoin falling more than 15 per cent and Ether seeing a 30 per cent drop.

FTX investors have secured to pull their money since the announcement. It has been reported that $6 billion (6 billion) was pulled in just three days.

How did this happen and is this a crypto crisis? Euronews Next takes a look.

How did it start?

The CEO and founder of FTX Sam Bankman-Fried is known by his initials SBF and as the crypto kid, being just 30 years old.

Last week, CoinDesk reported that a lot of the balance sheet of Bankman-Frieds trading company Alameda Research was in FTXs digital token called FTT.

Concerns then mounted about the exchanges apparent insolvency, and following CZs announcement to acquire the Bahama-based exchange firm, there was a slowdown in withdrawals from FTX customers.

The price of FTXs crypto token also plummeted by 80 per cent, wiping $2 billion (2 billion) in value. FTT collapsed to around $3 (just under 3) from its price over the weekend of around $20 (just under 20).

As for Bankman-Fried, his personal wealth plummeted almost 94 per cent in a single day to $991.5 million (991.8 million) and he has now disappeared from Bloombergs Billionaires Index.

What happens now?

Binance would have become an even bigger force to be reckoned with in the crypto exchange market.

Meanwhile, Bankman-Fried was hailed as somewhat of a crypto savior for helping other companies that have faced difficulty during this so-called crypto winter, most notably Voyager Digital which failed after it had a stake in Terra.

Bankman-Fried told investors that FTX is facing a shortfall of up to $8 billion (8 billion) from withdrawal requests and needs emergency funding. It is unclear for the moment if any other crypto companies will step in, but they could.

He also deleted tweets on Tuesday indicating that FTX had enough assets to cover clients holdings.

Is the crypto market at risk?

Following the crash in crypto prices this year, alongside pressure on the mainstream markets due to global financial strain, crypto companies have felt renewed pressure with firms such as Celsius and Three Arrows Capital folding and Bitcoin dropping from $69,000 (68,000) in 2021 to $20,000 ( 19,000) this year.

However, asked about the volatility of the crypto market, CZ told Web Summit attendees last week that everything is volatile, even the most lucrative tech stocks but it depends on the perspective, adding that if you take a five-to-10-year time frame, crypto is the best-performing asset.

But with cryptos now in freefall, the industry is facing yet another immediate challenge.

Is Binance to blame?

CZ said publicly last week that his company was selling its holdings in FTXs native token FTT, which triggered the selloff.

But according to CNBC, CZ told Binance employees in a memo on Wednesday that he did not master plan the collapse of FTX.

He said FTX going down is not good for anyone in the industry and employees should not view it as a win for us.

[ad_2]