Just 24 hours after announcing the 'rescue' of its rival FTX, Binance has done a U-turn and backed out of its buyout of the crypto exchange leaving FTX cashless and on the brink of complete chaos.
“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity,” Binance said in a tweet. “But the issues are beyond our control or ability to help.”
The big question is, what changed in 24 hours? Binance pointed towards the threat of regulation and investigation in its statement “As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,”
So the threat of a crackdown is pointing to an inevitable collapse for FTX and its crypto FTT. Reports indicate that founder CEO Sam Bankman-Fried told FTX.com investors that the company now faces a $6 billion liquidity shortage. The digital token FTT is also in free fall as it had already lost 80% of its value between Monday and Tuesday, falling to $5 and wiping out more than $2 billion in a day.
This is facing a contagion impact on the entire crypto ecosystem. Cryptocurrencies have plummeted as FTX gears to face its fate. Bitcoin extended its loss falling 15% in Wednesday's trade after facing a 13% drop on Tuesday. The popular coin is trading below $16,000 for the first time since November 2020. Ether collapsed more than 30% over the past two days and is close to falling below $1,000.