Is FTX to Blame for The Major Fall of Crypto?
Binance reached a nonbinding deal to acquire FTX's non-US subsidiary to assist a "liquidity shortfall" at the rival exchange, in a startling rescue that generated new fears among investors about cryptocurrencies. The agreement between FTX CEO Sam Bankman-Fried and Binance CEO Changpeng Zhao occurred as rumours over FTX's financial health snowballed into 6 billion USD in withdrawals in the 72 hours leading up to Tuesday morning.
Zhao, who had tweeted on Sunday that Binance will sell its holdings of the rival's coin owing to unexplained recent developments, contributed to the pressure on FTX. The move is the latest emergency rescue in the world of cryptocurrencies this year, as investors fled riskier assets in the face of increasing interest rates. The bitcoin market has dropped by around two-thirds from its peak of 1.07 trillion USD. On Tuesday, major cryptocurrencies gained on news of the agreement, but those gains were rapidly reversed.
Binance invested in FTX, a much smaller exchange, in late 2019, before abandoning the venture in July of last year. By then, FTX has grown into a serious competitor to Binance, which dominates the crypto sector. Tensions between Zhao and Bankman-Fried have risen in recent days, with a public spat taking place on Twitter. However, the rate of withdrawals proved to be too rapid. On a typical day, they have tens of millions of dollars in net in/outflows, Bankman-Fried said in a letter.
Movement of Bitcoin in the last five years. (Source: Trading Economics)
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