Cryptocurrencies Stability: Binance-FTX Agreement Calms Markets

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Crypto
Crypto

On Wednesday, cryptocurrency markets were tense and searching for a bottom after a sharp and widespread sell-off the previous day. The sell-off occurred when jitters about the stability of the cryptocurrency exchange FTX led to a rush of withdrawals and, ultimately, a bailout deal from the larger competitor Binance.

After a 10% drop on Tuesday, which marked its worst day since the middle of August, Bitcoin was down 1% on Wednesday, trading at $18,400.

Bitcoin is the most valuable cryptocurrency by market value. Since early on Tuesday, the second-largest cryptocurrency, Ether, has seen a loss of roughly 18%.

Investors Focus

Investors have been concerned about FTX’s financials since the previous week, resulting in the market’s attention being focused on FTT, the token linked to FTX.

On Tuesday, FTT dropped by 72%, and by Wednesday, it had dropped by another 22%, reaching a two-year low price of $4.25.

The pressure was partly applied on FTX by Changpeng Zhao, the CEO of Binance, who said on Sunday that the exchange would be liquidating its holdings of the competitor’s token owing to “recent disclosures” for reasons that were not detailed.

Binance Announcement

The players in the market were surprised when, on Tuesday, Binance announced that it had signed a nonbinding agreement to purchase FTX’s non-U.S. business in order to assist address what the company referred to as a liquidity shortfall.

Financial Health Agreement

After a week of uncertainty over FTX’s financial health, which accumulated to $6 billion in withdrawals in the 72 hours before Tuesday’s settlement, the two high-profile competitors, Zhao and Sam Bankman-Fried, FTX’s CEO, finally reached an agreement.

Another “alarm caution” for the damaged cryptocurrency market, according to Kami Zeng, director of research at Fore Elite Capital Management, a Hong Kong-based crypto fund manager. “…it’s still a black hole from here on out. We don’t know how widespread this problem is, but I think institutions should prove they have reserves immediately. In the meanwhile, confidence will not be able to “It was remarked Zeng.

He predicted that uncertainty would devalue any investment because market liquidity had dried up.

The Binance platform’s native asset, Binance coin, was not immune. At $317.11, it had a market cap of $52 billion, down 6% from Tuesday.

Monopolizing

Zann Kwan – (board adviser at Raffles Family Office and board member of the Singapore organization) ACCESS – where individuals active in cryptocurrencies and blockchain, collectively dubbed decentralized finance, issued a warning of broader and longer contagion.

“When it comes to the defi market, Alameda is a major player. There is more to come, “she said, referencing Alameda Research, a trading business created by Bankman-Fried with strong links to FTX.

Analysts saw connections between the demise of Terraform Labs in January. The subsequent failures of the Singaporean fund Three Arrows Capital and the American fintech companies Voyager Digital and Celsius used the same stablecoin, TerraUSD.

Affected: Temasek

  • The events between FTX and Binance are engaging FTX in our position as a shareholder” (Temasek Holdings), a Singaporean state investor.
  • The specifics of the agreement between FTX and Binance remain unknown.
  • It is also unclear whether or not the transaction to finalize.
  • The world’s largest cryptocurrency exchange – Binance is taking the next step in acquiring FTX.com. It will be conducting due diligence in the coming days.
  • Bankman-Fried, originally from California but now residing in the Bahamas (where FTX is headquartered), confirmed that the agreement does not include the companies’ U.S. activities.

A merger between the two cryptocurrency trading platforms has yet to be evaluated by authorities. According to antitrust experts, the deal may be investigated by U.S. antitrust authorities.

Bottom Line

The U.S. Justice Department is also looking into Binance for alleged money-laundering offenses. That inquiry is just one of many launched this year investigating Binance’s history of noncompliance with financial regulatory authorities.

Feature image: Pixabay

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