The world’s largest crypto exchange Binance has refused to bail out a struggling competitor FTX, threatening a complete collapse for the troubled company. Binance is reported to have changed its mind about the acquisition after assessing a competitor’s financial health.
“Originally we were hoping to assist FTX clients in providing liquidity, but the issues are beyond our control and ability to assist.”, — said in Binance. The fact is that according to the results of the FTX asset audit, a deep financial hole has been discovered, from which Binance does not want or cannot pull any competitor. Sources also indicate that FTX has sought help from Coinbase and OKX, but to no avail.
It is worth noting that many experts blame Binance for it being its activities that caused the collapse of FTX. A week ago, Coindesk published an investigation that found more than 40% of the assets of FTX and related companies (more than $6 billion) are in the “illiquid” FTT token issued by FTX itself. Following the release of the investigation, the Binance founder announced that he would sell Binance-owned FTT tokens for a total of $580 million, prompting an immediate collapse of FTT as well as a rush of crypto investors from FTX. who withdrew $6 billion, crippling the site’s normal operations. After that, FTX had to enter into a full takeover deal with competitor Binance.
According to industry sources, FTX CEO Sam Bankman-Fried told investors Wednesday that he needed reserves to cover an $8 billion shortfall in withdrawal requests from the exchange. The call to investors almost coincided with the announcement of Binance’s decision to pull out of the deal. It is known that a declaration of intent was concluded with FTX, which will not result in any legal consequences in the event of a purchase refusal.
Bankman-Fried is a well-known crypto enthusiast who just a few months ago committed around $1 billion to support affected crypto industry participants. Now he would need help himself because in one day he lost more than 90% of his wealth.
The speed of FTX’s demise was extremely rapid for its partners and clients, who believed a number of actions by the company, including a meeting with regulators in Washington, would help protect their crypto assets. Binance’s rejection of the deal raises questions about what to expect for investors who have entrusted their funds to FTX. Some crypto companies have already filed for bankruptcy this year, and investors must expect compensation for at least part of the funds.
FTX is known to have posted a warning on its Telegram page stating that withdrawals of both cryptocurrencies and traditional money on the platform have been suspended. In addition, the company strongly advised users not to top up their accounts.
Though many blame Binance for FTX’s fall, the crypto exchange says it didn’t plan for a competitor’s collapse and downfall.is of no use to anyone in the industry» and employees «should not consider what happened as a victoryHowever, in any case, Binance recommended not trading the FTT tokens issued by FTX until the situation is resolved.
The FTT token has already lost 80% of its value between Monday and Tuesday, depreciating $2 billion to $5 per unit in just one day. They dropped to $2.30 on Wednesday, after which the total value of tokens in circulation dropped to $308 million.
Against this backdrop, prices for many other cryptocurrencies began to fall – bitcoin fell 15% on Wednesday after falling 13% on Tuesday, and is trading near $16,000 for the first time since November 2020. Ethereum, on the other hand, has lost over 30% of its price over the past few days and the price of the cryptocurrency could soon drop below $1,000.