Binance pulls out of FTX deal, Bitcoin value hits 2-year low

November 10, 2022  10:32

Passions surrounding the deal between Binance and FTX crypto exchanges have weighed on the cryptocurrency market, as prices of some cryptocurrencies have started to fall amid rumors that Binance will rescue the liquidity-crunched rival exchange FTX by absorbing it. However, the exchange rates fell further when Binance pulled out of this deal. By Wednesday evening, the price of Bitcoin (BTC) had fallen to $15,625.

As CoinDesk reports, the value of the most popular cryptocurrency, Bitcoin, has fallen below $16,000 for the first time in two years.

Binance-FTX transaction cancelled?

On Tuesday, Binance signed a non-binding agreement to buy FTX's non-US assets in order to save the competitor from a liquidity crisis that FTX actually found itself in partly through Binance's own fault.

The problems at FTX started when Binance accused its rival FTX of committing fraud with FTT tokens. Binance then started selling these tokens, and many others followed suit, causing the price of these assets to fall from $22 to $14.2.

Then, in about three days, users withdrew more than $6 billion from FTX, leading to a liquidity problem. Crypto exchange FTX had to stop the process of withdrawing their funds from users and ask for help from Binance.

Initially, Binance agreed to absorb FTX. But after examining the financial statements of this exchange and, according to Binance representatives, finding a number of problems there, the company abandoned the transaction, citing misuse of funds and the alleged investigation by the US Securities and Exchange Commission (SEC).

Binance-vs-FTX

How this affected cryptocurrency market?

First the rumors of this deal and then Binance's rejection of it led to the collapse of the cryptocurrency market. The price of Bitcoin fell 14% on the day, the biggest one-day drop since mid-June. A year ago, this cryptocurrency had reached its all-time high of $68,982.20.

Now, the price of Bitcoin has risen slightly and remains at the level of $16,500; but for comparison, it was worth more than $18,000 Wednesday morning.

Prices of other cryptocurrencies are also falling. For example, Ethereum fell by 14% to $1,128.87.

The total capitalization of the cryptocurrency market today is about $914 billion, which is 10.6% less than on Wednesday.

Crypto traders fear that problems at FTX or at Alameda Research, a trading firm owned by its founder Sam Bankman-Fried, could affect not only the exchange rate of the FTX platform's exchange token, the FTT, but other cryptocurrencies as well.

Furthermore, this whole situation may also hit FTX investors—including SoftBank, BlackRock, Tiger Global, Thoma Bravo, Sequoia, and Paradigm. Moreover, people may lose trust in cryptocurrency—and this will lead to even bigger problems.

FTX leader loses 94% of his wealth in one day

This whole situation has also affected the ability of the head of the FTX crypto exchange, Sam Bankman-Fried; he lost 94% of his wealth in just one day. According to Bloomberg, Bankman-Fried's $15.6 billion fortune has shrunk to less than a billion.

Sam-Bankman-Fried

Thirty-year-old Sam Bankman-Fried's share in FTX was 53%—which, before the problems started, corresponded to $6.2 billion. However, FTX was not Bankman-Fried's most valuable asset; Alameda Research provided him with another $7.4 billion. But recent issues have seen both assets depreciate and are now valued at $1. Thus, Bankman-Fried's wealth decreased from $15.6 billion to $991.5 million—that is, by almost 94%—in just one day

Changpeng-Zhao

Today, the richest person in the cryptocurrency industry remains Binance CEO Changpeng Zhao, whose net worth is estimated at $16.4 billion. Additionally, in January, when the cryptocurrency market was booming, Zhao's fortune had reached $97 billion. 


 
 
 
 
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