Cryptocurrency exchange FTX is on the brink. It may fail today. It may fail tomorrow. Unless someone steps in with enough cash to save it, it will fail. The “run on the bank” was a direct response to a November 6th tweet from Binance CEO Changpeng Zhao (CZ): “As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came [sic] to light, we have decided to liquidate any remaining FTT on our books.”
Panic selling ensued. FTT (FTX’s cryptocurrency) lost 80% of its value between Monday and Tuesday, falling to $5 and wiping out more than $2 billion in a day. It fell by more than half on Wednesday to around $2.30, shrinking the total value of circulating tokens to roughly $308 million.
Not to worry, said CZ. Binance will take over FTX and save the day! For obvious reasons, the interweb immediately began squabbling about how and why CZ masterminded this “savage takeover” of FTX. In a note to his employees, CZ insisted this was not the case.
All’s Bad That Ends Bad
Yesterday afternoon, Binance walked away from its nonbinding takeover agreement with FTX. CZ wrote to his employees:
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.
The aftermath? BTC, ETH, and the broader crypto marketplace have taken a huge hit. Markets work in mysterious ways. As for the fate of FTX? It’s time to call Miracle Max.
Author’s note: This is not a sponsored post. I am the author of this article and it expresses my own opinions. I am not, nor is my company, receiving compensation for it.