Cryptocurrency market rocked by near-collapse of exchange

FTX founder Sam Bankman-Fried testified in the US Congress December 8, 2021.
FTX founder Sam Bankman-Fried

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 triggered a “significant liquidity crunch”.

Concerns about FTX’s financial health reportedly triggered $6bn of withdrawals in just three days.

Under a non-binding agreement, Binance will buy FTX’s non-US unit.

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 Mr 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% of its value this week.

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

    Also on Twitter Mr 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 news sent shockwaves through the digital assets market, with cryptocurrencies falling sharply. Bitcoin fell by more than 10% to hit the lowest level since November 2020.

    Meanwhile, online trading platform Robinhood lost more than 19% of its stock market value, while cryptocurrency exchange Coinbase fell by 10%.

    Leave a Reply

    Fill in your details below or click an icon to log in:

    WordPress.com Logo

    You are commenting using your WordPress.com account. Log Out /  Change )

    Twitter picture

    You are commenting using your Twitter account. Log Out /  Change )

    Facebook photo

    You are commenting using your Facebook account. Log Out /  Change )

    Connecting to %s