Rumoured FTX insolvency at the weekend developed into a liquidity crisis by Wednesday and a buyout by Binance, and now Binance has pulled out of the rescue, leaving FTX on the verge of collapse.
Binance Have Pulled Out of FTX Acquisition
In the past two days, we have reported on rumoured FTX insolvency, then the rescue of FTX by chief rival, Binance, and now another twist in the saga as Binance have pulled out of the rescue.
In a tweet on Wednesday, Binance said, “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.” They added in a further tweet, “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.”
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FTX Teeters on The Edge of Bankruptcy,
This leaves FTX on the verge of bankruptcy. FTX customers have fled the exchange after becoming concerned about whether FTX had sufficient capital. According to the Wall Street Journal, citing a person familiar with the matter, FTX CEO Sam Bankman-Fried told investors that FTX is looking at a shortfall of up to $8 billion from withdrawal requests, which requires emergency funding.
The FTX native token has plunged further again and is now trading at only 12% of its value from a week ago.
Crypto investors’ concerns were raised by the fact that the balance sheet of sister company to FTX, Alameda Research, was full of increasingly worthless FTT tokens and whose total value would not cover the exchange’s liabilities, thereby essentially making FTX insolvent.
Cryptocurrencies Plunge
The broader cryptocurrency market saw prices for most altcoins plunge for a second straight day on Wednesday and again today in the wake of this news. Fears are for a domino effect as was seen earlier this year, with potential for further, new deleveraging ramifications across the crypto and decentralised finance space.