After a sobering reminder that the bailout plan for cryptocurrency exchange FTX is far from finalized, FTX token continued to experience intense selling pressure on Wednesday.
After announcing intentions to purchase FTX’s non-US assets, Binance CEO Changpeng Zhao tweeted, “This is a highly dynamic scenario, and we are monitoring the situation in real time.” This prevented the collapse of the second-largest cryptocurrency exchange in the world.
In addition, Zhao stated that “We expect FTT to be quite volatile in the following days as things unfold” and that “Binance has the authority to withdraw from the agreement at any moment.”
Following Zhao’s warning on Tuesday, FTT, the FTX network’s native token, almost instantly dropped 80% of its value, shattering expectations for a speedy and easy settlement for the approximately one million non-US customers of FTX. FTX was trading at $4.0871 as of 5:20 a.m. ET (10:20 a.m. GMT), down 78% from Tuesday’s closing price.
The due diligence promised by Zhao is complex and may take some time to accomplish, according to Bernstein, whose main concern is determining whether client assets are gone and, if so, whether their disappearance is related to wrongdoing by the leadership.
It’s complicated, and Binance will need time to be careful, Bernstein noted.
Conversely, Cowen analysts have cautioned that US authorities may attempt to thwart the purchase on the basis of national security, even if it excludes FTX’s US activities. Data from Chainalysis revealed earlier this week that Binance has processed more than $8 billion in transactions with Iran since 2018, enabling the Islamic Republic to evade US sanctions. Binance, which has a dubious past with authorities throughout the world, was confronted with new problems.
Before last week, when a Coindesk investigation claimed Alameda Research, an investment firm connected to FTX, had artificially supported FTT, it was trading as low as $25.
Concerns that FTX released the tokens in order to borrow from it in order to pay for its increasing obligations were raised by the fact that Alameda’s balance sheet revealed a sizable holding of FTT as collateral. FTX raised money at the beginning of the year, but it’s possible that it ran out of cash after spending a lot on failed digital companies like BlockFi and Voyager Digital when the Terra/Luna network collapsed.
In Alameda, where it made up more than a third of all assets valued at $14.6 billion at the end of June, the value drop of FTT is probably poisonous. Alameda claims that the Coindesk balance statement was inaccurate and did not accurately depict its genuine financial status.
Over the past 24 hours, the death of FTT has had a significant impact on other cryptoassets as well. Solana fell 42% on concerns that Alameda may have to sell a significant portion of its holdings in the currency to cover the hole left by FTT. the losses of FTT formed its balance sheet.
The collapse of a widely regarded as robust and reliable exchange affected more conventional coins as well, dealing another major damage to the industry’s image and leading investors to look for the safety of the currency. standard fiduciary Ethereum dropped 22% to $1,168 while Bitcoin dropped 11% to $17,380, its lowest level in two years.