News

FTX might be on the brink of collapse

The crypto world is still going through a rough patch it seems. Binance just backed down from a non-binding acquisition deal with FTX, and now Sam Bankman-Fried’s company is in trouble.

Advertisement

Binance announced last Wednesday that it’s no longer acquiring the crypto company.

FTX
The deal between Binance and FTX is off. Source: Adobe Stock.

On Wednesday, Binance announced that it’s no longer planning on acquiring FTX. The news surprised crypto investors, and put Sam Bankman-Fried’s company in a tight spot.

The decision comes one day after Changpeng Zhao, Binance’s CEO, announced that the company had reached a deal to purchase FTX’s foreign businesses for an undisclosed amount. The purchase would help FTX with its liquidity crisis. Early in 2022, FTX was valued at over $32 billion. 

Binance stated in a tweet that it had hopes to support FTX’s customers and provide liquidity. However, the issues presented are beyond their control or ability to help. 

According to insiders, Bankman-Fried turned to Binance on Monday night after facing a liquidity crunch. FTX’s CEO was struggling to raise enough money from investors and venture capitalists. 

Initially, Changpeng Zhao agreed to help. However, Binance was soon to change its course, saying there were alleged U.S. agency investigations and mishandled customer funds on FTX’s part. 

Right now, it’s unclear who will be next in line to purchase Bankman-Fried’s crypto empire. The CEO told investors that the company is currently facing an $8 billion shortfall due to withdrawal requests, and that it needs emergency funding to meet the demand. 

The dissolution of the deal between Binance and FTX is just the latest chapter in a surprising collapse that’s shaken up the crypto world this week. Just on Monday, Bankman-Fried tried to reassure investors that FTX’s assets were fine.

However, as soon as Zhao stated publicly that Binance was going to sell all of its FTX native tokens, known as FTT, massive sell-offs started. And Bankman-Fried could not stop it. 

Crypto has had yet another rocky week

FTX
It looks like the crypto winter is far from over. Source: Adobe Stock.

According to Eric Newcomer, an independent reporter, one of Silicon Valley’s leading VC companies, Sequoia Capital, sank around $210 million into FTX.

Meanwhile, FTX recently told investors that their projection for its operating income would drop just a little over $144 million in 2022, down from $338 million in the previous year. Revenue was projected to increase to $1.1 billion from 2021’s $1 billion. 

On Tuesday, Bankman-Fried stated that FTX’s customers demanded withdrawals that went over the $6 billion mark. He then deleted a few tweets from the prior evening which indicated that the company had enough assets to cover all the holdings. 

In a memo released on early Wednesday, Changpeng Zhao told Binance employees that he never planned to collapse FTX. He reiterated that if the company goes down, it’s bad for everyone in the industry, and that Binance employees should not consider this as a win for them. He also advised them not to trade FTT tokens. 

Between Monday and Tuesday, FTT lost approximately 80% of its value. It wiped out more than $2 billion in a single day by falling to $5. On Wednesay, the token dropped to a significantly low mark of $2.30, which shrank the total value of circulating currencies to a little over $300 million. 

The crypto market as a whole sank amid the news between Binance and FTX. Bitcoin fell 15% on Wednesday following a 13% fall on Tuesday. The world’s most popular digital currency is currently trading below $16,000. Ether, the second most popular token, dropped more than 30% and is on the brink of trading below $1,000. 

What is cryptocurrency?

If you’re still lost as to why the possible collapse of FTX is such a big deal, we can help you understand it a little better. Follow the link below for our comprehensive guide on cryptocurrencies. Plus, a few tips as to whether you should (or shouldn’t) invest in them.

Young man isolated on white background holds bitcoin coin in his hands

What is cryptocurrency?

Learn what exactly is a cryptocurrency, how risky it is and how you can safely invest in them.

Trending Topics

content

Longest running TV shows of all time

TV has been around for a long time, and these are the longest running tv shows that have ever graced our screens.

Keep Reading
content

Costco Is Coming to These 3 Cities Soon

Get ready for an ultra-convenient retail therapy session! Costco is coming to three new cities soon. Get set for unbeatable prices.

Keep Reading
content

What are junk fees, and how is the White House tackling other rising costs?

Learn what junk fees are, how they can affect households nationwide, and what the President's administration is doing to tackle rising costs.

Keep Reading

You may also like

content

Useful housewarming gift ideas for your loved ones

A housewarming gift doesn't have to be cheesy or predictable! These unique gifts will make your friends' new homes feel more like home.

Keep Reading
content

The best hotels in the US: 8 amazing places to stay!

Planning a trip soon? A good hotel is essential! Check out our list of the best hotels in the US – you won't regret it!

Keep Reading
content

The 10 Best-Selling Books Series of All-Time

It's no secret that book series have tremendously impacted our lives. Let's take a look at the best-selling books of all time!

Keep Reading