Cryptocurrencies extended the declines as Binance’s potential acquisition of FTX highlighted how tensions in the industry are now plaguing some of its top players.
Cryptocurrencies extended the declines as Binance’s potential takeover of controversial rival exchange FTX highlighted how tensions in the digital asset industry are now plaguing some of its top players.
Bitcoin, the largest token by market value, fell a whopping 5.4% on Wednesday after falling nearly 10% the day before, trading at around $17,700 at 9:50 AM in London. Nearly every digital coin struggled: Ether, Solana, Polkadot, Avalanche, and meme token Dogecoin all fell.
Binance Chief Executive Officer Changpeng “CZ” Zhao stunned the crypto world on Tuesday by announcing that his company planned to acquire rival FTX.com, which was experiencing a liquidity slump after Zhao announced it had acquired a $530 million stake in FTX’s native token. .
Traders quoted a Zhao tweet that a letter of intent between the two sides is non-binding as it contributes to the market turmoil. Investors are on edge about spreading contagion given the critical role FTX and its co-founder Sam Bankman-Fried played in the industry.
“Since I entered the crypto industry in 2016, very few periods have tested the market infrastructure and participants like the past 24 hours,” said crypto hedge fund manager Dan Liebau of Modular Asset Management.
FTT, the utility token of the FTX exchange, has collapsed by more than 75% in the past 24 hours, trading at around $4.20, according to CoinGecko data.
“The letter of intent is non-binding, meaning further issues could arise if CZ/Binance decide to pull out of the deal,” said David Moreno Darocas, research associate at CryptoCompare.
The letter of intent to acquire Zhao’s Binance Holdings came after a bitter feud between Bankman-Fried came into the open. Zhao actively undermined confidence in FTX’s finances and caused an exodus of users from the three-year-old FTX.com exchange.
A day before a deal was reached, Bankman-Fried said on Twitter that the assets on FTX were “fine”.
Conditions for the emergency buyout were scarce, with Binance saying the deal came after FTX suffered “a significant liquidity crisis” and asked the company for help.
The price of Sol, the original token of the Solana blockchain – which is associated with both FTX and Bankman-Fried crypto trading house Alameda Research – has seen dramatic declines alongside other tokens from Solana-based projects. Sol fell 27% on Wednesday, bringing the loss to 90% this year.
“SBF and FTX were Solana’s biggest patrons,” Teng Yan, a researcher at digital asset research firm Delphi Digital, said on Twitter. “This era is over. Binance has taken over and they will greatly favor the BNB chain over Solana. Alameda had ~$1 billion in locked and unlocked $SOL, which they will have to sell if they go bankrupt. This puts tremendous selling pressure on $SOL.”
The FTX-Binance ordeal gave some traders flashbacks to the problems facing Celsius – the cryptocurrency lender that collapsed earlier this year – as well as those of other companies engulfed by this year’s crash in digital assets.
Teong Hng, CEO of crypto investment firm Satori Research, said the “situation is still very fluid”, adding: “I am confident that these two crypto giants will do the right thing to protect investors and the industry .”