BENGALURU: The world’s largest cryptocurrency exchange Binance has acquired its rival FTX, which was on the verge of collapse. This is said to be the biggest acquisition in the crypto world. Though the deal amount is not disclosed, this acquisition shows the volatility of cryptos.
FTX was valued at $32 billion, and the crypto exchange has been looking for fundraising and evaluating acquisitions for some time now. What were the reasons that led to this liquidity crunch? Punit Agarwal, founder and CEO, KoinX, explained, “Cryptos crashed again as Binance announced it is selling off all its FTX Token (FTT), and this started a big rumour that FTX could possibly be going bankrupt. FTT dropped more than 40% after that announcement, and that led to a broader market contagion in which all major currencies tumbled.”
The Indian ecosystem is also affected as the majority of the exchanges have FTT tokens, and due to the sudden drop in price all users are now at a loss. Besides FTT plummeting on Wednesday, many altcoins are seeing heavy volatility.
“Bitcoin also made a new yearly low just above $17,100. The worst might not be over yet, and anything can happen. FTX accepting the bailout means they effectively have a hole in their balance sheet; Binance will bail out FTX, but what will happen to Alameda? Alameda (crypto trading firm) has been borrowing from lenders by giving FTT as collateral,” asked Rajagopal Menon, VP, WazirX.
According to him, this is a worrying development for the industry that is already in the middle of a bear market. “The general feeling was that we had hit bottom, and the only way was up. Now the market has to deal with this new unknown; what is the size of the hole that SBF (FTX CEO Sam Bankman-Fried (SBF)) and FTX have dug themselves into?” he questioned. Taaran Chanana, MD and co-founder of MemeChat said the newbies will now be scared to get in.