The crypto market is a mess: Binance abandons its attempts to save FTX

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The crypto market is a mess: Binance abandons its attempts to save FTX

The news that Binance will buy rival cryptocurrency exchange FTX resonated with the public and served as a lifeline for FTX, which was threatened with a complete collapse, although experts warned that such a move tends to monopolize the cryptocurrency market.

However, Binance CEO Changpeng Zhao announced yesterday that he is abandoning the merger of the two companies. Changpeng and the director of FTX, yesterday's multi-billionaire Sam Bankman-Fried, previously signed a non-binding letter on the merger of the two crypto companies.

Just 24 hours after Binance CEO Chengpeng Zhao announced that the world's largest cryptocurrency company had reached an agreement to buy FTX, saving the company from a liquidity crisis, it all came crashing down. Earlier this year, private investors valued FTX at $32 billion.

"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”. Binance wrote in a Twitter post on Wednesday. On Monday night, facing a liquidity crisis, Bankman-Fried struggled to raise money from investors before going to Binance, according to global media.

Zhao initially agreed to step in, but his firm quickly reversed course, citing reports of “mismanagement of client funds and alleged investigations by US agencies”.

Very little chance of saving FTX

It is unclear who is next in line to buy this crypto exchange, if anyone is interested.

Bankman-Fried told investors the company faces up to an $8 billion shortfall to meet withdrawal requirements and needs urgent financing. The collapse of the Binance – FTX contract is the latest chapter in the shocking collapse that rocked the cryptocurrency world this week.

Bankman-Fried only tried to reassure investors on Monday that the company's assets were in order. But after Binance's Zhao publicly said that his company was selling its stake in FTX's native token FTT, the sell-off began and there was nothing FTX could do to stop it.

Bankman-Fried said Tuesday that clients had requested $6 billion in withdrawals. He also deleted tweets from the previous day indicating that FTX had sufficient funds to cover client assets. Zhao told Binance employees that he "didn't make a plan" for the collapse of FTX.

He emphasized that FTX's decline "is not good for anyone in the industry" and that employees should not "see it as a win for us."
He also told them not to trade FTT tokens until the situation stabilizes.

FTT has already lost 80% of its value at the beginning of the week and is down to five dollars. On Wednesday, the decline continued, and the value of the token fell to $2.30. Dragged by the chaotic unraveling of FTX, other cryptocurrencies also started to fall this week.

Thus, the largest cryptocurrency bitcoin fell by 15% on Wednesday, just a day after it had already lost 13% of its value on Tuesday. So last night one bitcoin traded for less than $16,000, which is the first time since November 2020 that this token was at such a low level.

“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." Binance noted.