Cryptocurrency market rocked by near-collapse of FTX

BBC: The digital assets market has been rocked by the near-collapse of one of the world’s biggest cryptocurrency exchanges, FTX. On Tuesday, FTX struck a bailout deal with larger rival Binance after a surge in withdrawals caused a “significant liquidity crunch”.

Concerns about FTX’s financial health reportedly triggered US $ 6 billion (£5.2 billion) of withdrawals in just three days. Binance says it agreed to buy FTX’s non-US unit, pending due diligence.

FTX’s founder Sam Bankman-Fried and Binance’s Chief Executive Changpeng “CZ” Zhao are two of the most powerful people in the cryptocurrency market and high-profile rivals. The pressure on FTX came in part from Zhao, who tweeted on Sunday that Binance would sell its holdings of FTX’s digital token, known as FTT. 

“Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books,” he said. FTT has lost almost 80 percent of its value this week.

On Tuesday, Zhao tweeted, “This afternoon, FTX asked for our help. There is a significant liquidity crunch”.

Binance said it had signed a letter of intent to buy the firm but had “the discretion to pull out from the deal at any time”. Also on Twitter Bankman-Fried said, “Our teams are working on clearing out the withdraw backlog as is. This will clear out liquidity; all assets will be covered 1:1.” “The important thing is that customers are protected... We are in the best of hands,” he added. Bankman-Fried also noted that FTX’s US business was a separate company and “not currently impacted by this”.

“This is a black swan event that adds more fears in the crypto space. This cold winter for crypto now takes on more fear,” Dan Ives, Senior Equity Analyst at Wedbush Securities told the BBC. The news sent shockwaves through the digital assets market, with cryptocurrencies falling sharply. Bitcoin fell by more than 10 percent to hit the lowest level since November 2020. Meanwhile, online trading platform Robinhood lost more than 19 percent of its stock market value, while cryptocurrency exchange Coinbase fell by 10 percent.