10.11.2022 – There is a drama going on right now for the bulls in the crypto market: the bounced acquisition of FTX by Binance is causing distrust. Bitcoin slid to a two-year low.
Tough times for long-orientated traders and investors: Because of the botched takeover battle, Bitcoin has dived, as you can see very impressively here in the four-hour chart of BTCUSD. Congratulations to all short-oriented traders. Things are hardly different for the second most important e-currency, Ether.
Yesterday, Wednesday evening, there was a big bang. Binance announced via Twitter that it had reviewed FTX’s books and subsequently refrained from a potential buyout. Binance also referred to media reports that FTX had misappropriated customer funds. Binance wrote on Twitter, “The problems are beyond our control and beyond our ability to help.”
How reputable is FTX?
The background: a few days ago, the website “Coindesk” had criticized massive weaknesses in the business model of FTX and its sister company Alameda. As a result, the head of Binance, Changpeng Zhao, reported that he would part with his FTT tokens. FTT is the cyber currency issued by FTX. The background is that Binance had invested in FTX in 2019, however, last year FTX bought out Binance’s shares and paid for them in FTT tokens worth $530 million.
After CZ’s announcement, a real crypto bankrun broke out. This is because FTX and Alameda’s books hold large amounts of FTX’s in-house token FTT and Solana, according to media reports. One FTT was worth just under $3 on Thursday – it was worth over $25 a week ago. And Solana, part of the blockchain of the same name, also weakened: Most recently, the price was around $14, compared with $36 just a week ago. In addition to FTX, the hedge fund Alameda is now also sailing in dangerous waters. He had so far brought buyers and sellers together as a market maker on FTX. If he is gone, that could mean new pressure for the cryptos, Fundstrat analysts warned.
Apparent threat of insolvency
FTX must now prepare for insolvency proceedings, according to insiders. Media are reporting a shortfall of up to $8 billion; to remain solvent in the short term, FTX will need to raise $4 billion. And all this from one of the previous heavyweights among the traders for e-currencies. FTX was considered one of the most respected players in the crypto world ever. After all, the company had always sought proximity to regulators and repeatedly bought up troubled firms.
This leaves many crypto disciples asking the question of all questions: how rotten must the situation be at many other, far smaller exchanges? Already in May, Project Terra had gone belly up – investors lost funds amounting to $50 billion. And in July, the Celsius Network platform also had to file for bankruptcy. Unfortunately, it doesn’t look like the selling pressure is out of the market. After all, investors don’t like uncertainty and have to fear that their wallets are no longer safe with the various crypto exchanges. A toxic fog of distrust is wafting over the entire market. As the “Handelsblatt” has calculated, the market cap of all cryptos has slipped since the weekend from 1.05 trillion dollars to about 844 billion dollars – a whopping minus of almost 20 percent. Counter-movements are always possible, of course. So keep an eye on the real-time news – Bernstein Bank wishes you successful trades and investments!
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