Binance CEO "Conducting Due Diligence for Acquisition to Resolve FTX Liquidity Issues"
Another Incident Following Luna·Terra Crisis That Further Dampened Investor Sentiment
[Asia Economy Reporter Han Seung-gon] Binance, the world's largest cryptocurrency exchange, announced that it will acquire its competitor FTX, which is facing a liquidity crisis. However, investor sentiment is rather shrinking. Analysts suggest that concerns over the possibility that the FTX acquisition may not be successfully completed, along with fears of a 'bank run' (massive withdrawal of deposits) at FTX, have stirred investors' anxiety.
The so-called 'FTX-triggered cryptocurrency (coin) crash' began with a report by a coin-specialized media outlet stating that the coin trading structure of the FTX exchange was unsound. Immediately after the report, Binance announced that it would sell all FTX-related coins. Subsequently, a liquidity crisis occurred at FTX, and a bank run broke out among investors. Some interpret this incident as once again revealing the instability of the cryptocurrency market.
On the 8th (local time), according to Bloomberg and others, Zhao Changpeng, CEO of Binance, stated on Twitter, "FTX has experienced a significant liquidity crunch and has requested help from Binance," adding, "We have signed a non-binding LOI (Letter of Intent) to fully acquire FTX and assist in resolving the liquidity crisis."
Sam Bankman-Fried, CEO of FTX, also tweeted at the same time, "Our team is currently working on restructuring, which will resolve the liquidity crunch." He explained, "All assets will be covered on a one-to-one basis," and "This is one of the main reasons we asked Binance to step in."
However, investor sentiment is rather shrinking. On the 9th, the day after the announcement of the FTX acquisition, according to CoinMarketCap, a global cryptocurrency intermediary site, as of 7 a.m., Bitcoin was trading at $18,658, down 9.9% from 24 hours earlier. At the same time, Ethereum, the second-largest cryptocurrency by market capitalization, was trading at $1,335, down 15.5% from the previous trading day. Additionally, Dogecoin was down 22.6% to $0.088. Major coins such as Ripple (XRP), Polygon (MATIC), and Shiba Inu (SHIB) also showed double-digit declines.
FTX's liquidity crisis originated from its affiliate Alameda. On the 2nd, cryptocurrency media outlet CoinDesk obtained Alameda's balance sheet and reported that most of its assets were filled with FTX tokens. According to the media, there was an interpretation that Alameda was buying most of the tokens issued by FTX, raising concerns that the financial instability of the two companies could be linked.
Following the CoinDesk report, Zhao Changpeng, CEO of Binance, announced on the 7th that Binance would sell all FTX tokens it held. He said his decision was due to "recent revelations," targeting the coin structure of FTX and Alameda. Ultimately, Zhao Changpeng's announcement to liquidate FTX tokens triggered a bank run at the FTX exchange, and as the situation worsened, Binance announced it would acquire FTX.
Bitcoin later rebounded and briefly recovered to $20,000, but skepticism about the completion of the acquisition deal spread in the market, leading to continued crashes of Bitcoin and several other coins. As major coins plummeted, Alameda countered the report by stating that it only looked at part of the balance sheet, but this was insufficient to resolve the situation.
Moreover, the contract document for Binance's acquisition of FTX further unsettled the already weakened investor sentiment. The market is paying attention to the fact that although Binance signed a Letter of Intent (LOI) for the FTX acquisition, Zhao Changpeng added a caveat that "this document is not legally binding."
Cryptocurrency analysis firm CryptoCompare predicted, "If Zhao Changpeng withdraws from the acquisition deal, the (FTX liquidity) problem could still arise." Coin investment firm Satori Research also diagnosed, "A non-binding LOI shows that the situation is fluid."
Given these circumstances, some view this incident as once again demonstrating the instability of the coin market. Previously, the cryptocurrency market experienced a 'panic sell' phenomenon across the market due to the Luna-Terra incident. Bloomberg expressed concern, stating, "The cryptocurrency world was thrown into chaos by the sudden collapse of the Terra stablecoin," and "Terra's collapse could bring about the 'death' of major blockchain markets."
There are also forecasts that the Bitcoin downtrend could worsen. CryptoCompare analyzed in a recent report, "Bitcoin could record its worst loss ever this year," adding, "Compared to past bear markets, Bitcoin has not yet reached the bottom."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
