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Crypto Sector Shaken by FTX Collapse, Binance Takeover

Market participants were stunned when Binance signed a non-binding agreement on Tuesday to buy FTX’s non-US unit to help cover what it called a liquidity crunch.


Bankman-Fried's FTX exchange saw more drama on Saturday and may have been hit by hackers.
FTX exchange, set up by Sam Bankman-Fried, saw more drama on Saturday and may have been hit by hackers. But the exchange founder denied fleeing to Argentina, saying he is still in the Bahamas. File photo: AFP.

 

The crypto sector has been rocked by the collapse of Sam Bankman-Fried’s FTX exchange following a rush of withdrawals that ended up with a bailout deal from bigger rival Binance.

Bitcoin, the biggest cryptocurrency by market value, was down 2% at $18,250, after a 10% plunge on Tuesday that marked its worst day since mid-August. Ether, the next largest, has lost nearly 18% since early Tuesday.

The market focus was, however, on FTT, the token tied to FTX, whose financials have been the source of market angst since last week. FTT plummeted 72% on Tuesday and was down a further 5% at a two-year low of $4.61 on Wednesday.

Pressure on FTX came in part from Binance CEO Changpeng Zhao, who said on Sunday that Binance would liquidate its holdings of the rival’s token due to unspecified “recent revelations.”

Market participants were then stunned when Binance signed a non-binding agreement on Tuesday to buy FTX’s non-US unit to help cover what it called a liquidity crunch.

 

ALSO SEE:

Cryptos Crumble as FTX Exchange Rumours Panic Traders

 

 

‘More Will Unfold’

The deal between high-profile rivals Zhao and FTX’s CEO Bankman-Fried, followed week-long speculation about FTX’s financial health that snowballed into $6 billion of withdrawals in the 72 hours before Tuesday’s deal.

“The contagion will play out in the next few days and weeks,” said Zann Kwan, board advisor at Raffles Family Office and member of Singapore association ACCESS, which includes participants involved in cryptocurrency and blockchain, together called decentralised finance (defi).

“Alameda is a big market maker in the defi market. More things will unfold,” she said, referring to Alameda Research, a trading firm founded by Bankman-Fried that has close ties with FTX.

Bankman-Fried said his teams were working on clearing out the withdrawal backlog, though uncertainty in the market about the bailout’s status and the depth of problems kept traders nervous.

“This may fuel further contagion throughout the crypto market …,” said Mads Eberhardt, crypto analyst at Saxo.

 

  • Reuters with additional editing by Jim Pollard

 

 

ALSO SEE:

 

Hong Kong Suggests Expanding Crypto Trade to Retail Market

 

Ether Eyes Bitcoin’s Crypto Crown as ‘Merge’ Upgrade Looms

 

Three Arrows Excluded as Crypto White Knight Rescues Voyager

 

Young Crypto Whiz ‘SBF’ Backs Regulatory Oversight

 

 

Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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