Cryptocurrencies crash as Binance backs out of buying FTX

Binance founder, Changpeng Zhao reacts as Bitcoin investors lose $43.3bn

Binance, the world’s largest cryptocurrency exchange, has reversed its intention to acquire the floundering cryptocurrency exchange FTX.COM.

This comes just 24 hours after BInance announced a plan to purchase its rival. It had intimated that it may potentially withdraw out of the acquisition pending due diligence, a decision that has now been made.

The decision to pull out was all but confirmed on Wednesday by the company as they claimed the issues derailing the FTC acquisition were beyond their control.

CRYPTOCURRENCY: Binance has legally registered with Italy's financial company
CRYPTOCURRENCY: Binance has legally registered with Italy’s financial company

BInance said the decision to pull out of the deal was as a result of corporate due diligence and information that regulators were investigating issues of mishandling of investor funds.

  • “As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com
    .”
  • “In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help.”
  • “Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient, and we believe in time that outliers that misuse user funds will be weeded out by the free market.”
  • “As regulatory frameworks are developed and as the industry continues to evolve toward greater decentralization, the ecosystem will grow stronger.”

This U-turn marks another major event in the decade long story of cryptocurrencies and its knack for creating and eroding value.

  • Just yesterday, CZ, the founder of Binance suggested that the decision to acquire FTX was necessary for confidence in the cryptocurrency market.
  • He also said the decision was to help protect users and help cover the liquidity crunch” if FTX was to go bust.
  • Pulling out implies FTX might be headed towards bankruptcy and could take down the entire cryptocurrency market with it.

Bitcoin prices fell 15% to $15.7k on Wednesday as investors liquidated millions of tokens in investments.

  • The bloodbath may just have started, and the fear is that it could spread beyond cryptocurrency.
  • Ether, Binance coin and other altcoins all fell as fear gripped the entire world of crypto.
  • Just to add that media outlets are reporting that FTX has a shortfall of about $8 billion and could be facing bankruptcy.

There could be a global contagion from the collapse of FTX.COM and this could spread beyond cryptocurrency to the mainstream debt market.

  • Investors are already concerned about which global banks might be exposed to FTX, directly and indirectly.
  • Stay alert.



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