Crypto investors have endured more than their fair share of sudden market meltdowns this year thanks to shocking revelations about poorly managed crypto projects.
This week brings yet another seismic disruption. This time it's FTX—the fourth largest crypto exchange in the world—which until just last week was considered to be an industry stalwart.
In a rapid series of events that unfolded largely on Twitter, FTX had agreed to sell a large part of its operating business to rival Binance after a wave of crypto withdrawals threatened to take FTX down.
"There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com to help cover the liquidity crunch. We will be conducting a full DD (due diligence) in the coming days," said Binance CEO Changpeng "CZ" Zhao in a Nov. 8 tweet.
However, barely 24 hours after the announcement, the deal was off, with Binance announcing on Twitter that they would no longer proceed with the takeover, citing "mishandled customer funds and alleged US agency investigations".
Cue further crypto falls, with Bitcoin plunging by more than 13% to $US15,840 after the news broke. BTC was hovering above $20,000 earlier in the week, and the latest fall marked the lowest point since November 2020. Ethereum wasn't spared either, dropping by 13% in the wake of the deal being scuppered.
At the heart of the issue was FTX's native token, FTT, which has been eviscerated in a huge sell-off, plunging more than 80% in the past few days. Facing a rapidly worsening liquidity crunch, FTX had little choice but to find a suitor to save the business. But with the deal now off, and no saviour in sight, FTT continued its precipitous slide alongside the other crypto coins: dropping by more than 50% in 24 hours alone, according to CoinMarketCap.
Binance said in a statement: "In the beginning, our hope was to be able to support FTX's customers to provide liquidity, but the issues are beyond our control or ability to help."
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