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One of the world’s largest cryptocurrency exchanges, FTX, was close to going out of business. This has shaken the market for digital assets.
After many withdrawals caused FTX to run out of cash on Tuesday, it made a deal to get help from a more significant competitor, Binance.
FTX’s financial health concerns have led to $6 billion (£5.2 billion) in withdrawals in just three days.
Binance says that, pending due diligence, it has agreed to buy FTX’s non-US businesses.
Sam Bankman-Fried, who started FTX, and Changpeng “CZ” Zhao, who runs Binance, are two of the most well-known and influential people in the cryptocurrency market. They’re also rivals.
A part of the pressure on FTX came from Mr. Zhao, who said on Sunday that Binance would sell its FTT digital tokens.
Mr. Zhao tweeted Tuesday, “FTX has asked for our help this afternoon. But, unfortunately, there is a big lack of cash.”
Binance said it had signed a letter of intent to buy the company but could back out of the deal at any time.
Sam Bankman-Fried is a well-known person in the cryptocurrency world, which is full of them.
The cryptocrash
Since the “cryptocrash” in the spring, the vocal owner of FTX has been a sign of hope for investors of all sizes.
Even though other businesses have failed, Bankman-Fried seemed to be going well.
In the last six months, the 30-year-old had given rescue packages to companies in trouble and made profitable secured acquisitions. He also gave high-profile interviews with the media.
Reports by CoinDesk showed that his company’s finances were in bad shape. Now, all those honest interviews are coming back to bite him.
Now, it looks like his company has joined the growing number of cryptocurrency ventured that have failed because of a problem that keeps coming up: they need more cash.
FTX isn’t the first company to fail because of the current “crypto winter,” but it is by far the biggest.
The news sent shock waves through the market for digital assets, causing prices to drop sharply.
Bitcoin lost more than 10% of its value, reaching its lowest point since November 2020.
At the same time, Robinhood’s stock market value fell by more than 19%, and Coinbase’s value fell by 10%.
Binance pulls out of bailout deal with FTX
The biggest cryptocurrency exchange platform in the world, has backed out of a bailout deal with FTX, a smaller exchange.
Binance said it would not go through with the deal after doing some research.
It said that reports of “mishandled customer funds and alleged investigations by US agencies” had led to its decision.
There had been a lot of withdrawals from FTX, which caused a “liquidity crunch.”
FTX’s financial health concerns have led to $6 billion (£5.2 billion) in withdrawals in just three days.
The US Securities and Exchange Commission (SEC) looked at how FTX handled customer funds and how it lent out cryptocurrency, Reuters reported on Wednesday.
The market regulator looked to see if the platform kept customers’ assets separate as required by securities laws and if it traded against customers.
After Binance pulled out of the deal, Bitcoin dropped below $16,000. It then made some progress, but shares of the cryptocurrency exchange Coinbase fell by more than 9.5%.
Sequoia Capital, a venture capital firm, said it would write off all of its more than $210 million investment in cryptocurrency exchange FTX because the company is in danger of going bankrupt.
More and more cryptocurrency businesses have failed because they need more money.
The SEC and other regulators have been looking into the industry as worries about how crypto platforms trade grow. This has added to the stress.
Read Also: Opinion: Crypto needs no input from the government
This year, a subsidiary of the cryptocurrency company BlockFi agreed to pay a record-high fine to settle claims about its retail lending product.
