Bitcoin suddenly surges by $1,300 after Binance and FTX reach a deal to solve ‘liquidity crisis’


The cryptocurrency market cut losses on Tuesday as the world’s two largest crypto exchanges, Binance and FTX, reached an agreement to resolve the latest “liquidity crisis”.

Bitcoin was last about 1% lower at $20,513.00, according to Coin Metrics. Earlier in the day, it dropped to $19,244. In the meantime, ether was last 2% lower at $1,560.20.

The two largest cryptocurrencies by market cap spiked after hitting their session lows just before Sam Bankman-Fried, CEO of crypto exchange FTX, said: announced on Twitter that the company has agreed to a sale for an undisclosed amount to Binance. Binance CEO Changpeng Zhao confirmed the news minutes later on Twitter.

The deal will affect the non-US companies of FTX and Binance. The US branches of each company, Binance US and FTX US, have been separated and will not be affected by the news, Bankman-Fried, aka SBF, said in his tweets. The deal is not closed and the companies have more due diligence to do, the CEOs said.

The crypto market slumped earlier in the day before the deal came through as investor concerns about FTX’s solvency continued to fester after rumors of the exchange and its sister company Alameda Research emerged in recent days.

“There are many mirrors to the Celsius and Three Arrows crisis that happened months ago and what you saw was investors having deja vu and fear of leaking into the markets,” said Conor Ryder, research analyst at Kaiko.

Some of the biggest losses hit crypto assets linked to Alameda, the trading company also owned by SBF. FTX Token (FTT), the native token of the FTX trading platform, is down 21.5% in the past 24 hours, according to Coin Metrics. The token linked to Ethereum competitor Solanaof which Alameda is a major lender has lost 10.7%.

In crypto stocks, Coinbase climbed back into the green, after falling a whopping 12.5% ​​earlier in the morning. Robinhood, in which SBF has a 7.6% stake, was last down 5% after falling just 9%. Crypto banks such as Silvergate and Signature and bitcoin miners such as Hut 8 and Riot Blockchain previously fell by double digits, but have also bounced back.

Investor Confidence Shaken After Binance Founder Changpeng Zhao tweeted on the weekend the company was due to sell its holdings to FTT. Binance is the largest crypto exchange in the world by trading volume and was an early funder of FTX. On Tuesday morning, FTX halted withdrawals from its platform after fearful investors tried en masse to withdraw their funds.

Zhao said in his tweet that Binance has about $2.1 billion worth of FTT and BUSD, the fiat-backed stablecoin issued by Binance and Paxos, combined.

“As a result of recent disclosures that have come to light, we have decided to liquidate all remaining FTT on our books,” he said.

Those revelations point to rumors about the solvency of FTX, the world’s second largest crypto exchange by trading volume. A report last week on the state of Alameda’s finances showed that much of its balance sheet is concentrated in FTT and that its various activities are leveraged with FTT as collateral. Alameda has disputed that claim, saying that FTT only represents a portion of its total balance sheet.

“The Alameda hedge fund is pegged to FTX through a ton of FTT tokens and the rumors started that if they use all these FTT tokens as collateral… there are two problems,” said Jeff Dorman, chief investment officer at Arca. “If the price of FTT drops a lot, Alameda could face margin calls and all kinds of pressure; two is, if FTX is the lender to Alameda, everyone will be in trouble.”

“What could have been an isolated problem at Alameda turned into a bank run,” he added. “Everyone started taking their assets out of FTX and there is a fear that FTX would be insolvent.”

A ‘black eye for trust’

Ryder said industry observers were “generally” confident that FTX and its customers would “make it right,” but the panic was understandable. Before late Tuesday morning, SBF had said little about quelling the fear.

“The problem is the opaque nature and lack of transparency about FTX reserves, Alameda’s reserves, the links between the two — nobody really knows how the two are intertwined,” he said. “From that side of things, it mirrors Celsius’s problems a lot because we don’t have transparency of funds, and FTX hasn’t come out and reassured investors, so that’s what we’re seeing leaking into the markets now.”

It makes a good case for more regulation of centralized entities, Ryder added. proof of reserves to protect the investor.

Dorman echoed Ryder’s sentiment, saying that while it could be a short-term liquidity problem at worst, it’s “another black eye for confidence.”

“they put” [the reserves] in a bank account? Do they use them to lend?’ said Dorman. This is where the lack of transparency comes in: something that probably isn’t a problem and shouldn’t be a problem becomes a short-term liquidity problem if FTX can’t. immediately process all recordings.”

Source link


Please enter your comment!
Please enter your name here