Cryptocurrencies tumble as Binance abandons FTX bailout plans

Cryptocurrency
markets have nursed heavy losses with bitcoin pinned
near a two-year low as investors fretted about the fallout from
the implosion of crypto exchange FTX.

FTX head Sam Bankman-Fried said on Thursday he was “exploring all
the options”, but fading hopes for rescue left FTX teetering. 

A
message on the FTX website said: “FTX is currently unable to
process withdrawals. We strongly advise against depositing.”

Larger rival Binance walked away from a bailout deal on Wednesday.

Focus is on the unknown size of customer losses and the hit
to sentiment from the latest and possibly largest collapse in an
industry that has turned into a minefield for investors.

FTX’s native token, FTT is down 90 percent this week and
was attempting to steady around $2 – not terribly far above its
record low around $1.50. Bitcoin fell below $16,000
for the first time since late 2020 overnight and was last at
$16,435.

Binance backed out of a non-binding offer to buy FTX after
due diligence. Another exchange, OKX, said it was also
approached by Bankman-Fried this week, who described liabilities
of $7 billion that needed covering quickly.

“Even Elon Musk would not be able to commit to a deal with
$7 billion liability within a few hours of negotiations. That
was too much for us,” Lennix Lai, director of financial markets
at OKX told Reuters news agency.

“(It) is a big hole to plug,” he added. “The dagger will
continue to hang over the crypto market, as long as the outlook
of FTX’s fate remains unclear.”

The Wall Street Journal reported that Bankman-Fried told
investors FTX needed $8 billion to cover withdrawals. FTX did
not respond to a request for comment.

READ MORE: Digital asset heists: 2022 set to be biggest year for crypto hacks

Confidence crisis

There are also early signs that the fallout could spread
beyond crypto markets, with jittery stock markets sliding on Wall
Street overnight.

“A top exchange failing – that’s on a different level,” said
Danny Chong, CEO of decentralised finance firm Tranchess, with
potentially wider ramifications than the failure of stablecoin
TerraUSD and crypto hedge fund Three Arrows Capital this year.

“People’s funds, including market makers’, are still
currently with FTX,” he said. “Just when people were thinking
that crypto winter might probably not last … along comes
another episode like this.”

The U.S. securities regulator is investigating FTX.com’s
handling of customer funds and crypto-lending activities,
according to a source with knowledge of the inquiry.

Bloomberg reported that the US Department of Justice is
also looking into the turmoil. A DOJ spokesperson declined to
comment.

Investors are already writing off funds ploughed into FTX.
Venture capital fund Sequoia Capital wrote down a $150 million
exposure to zero on Wednesday. Canada’s Ontario Teachers Pension
Plan, Tiger Global and Japan’s Softbank are also FTX investors.

Most crypto players remain bullish about the long term but
are braced for further falls in the near future. Bitcoin’s
20 percent losses this week are comparable to the drop in June when
Three Arrows Capital came under stress.

“What makes this new phase … problematic is that the
number of entities with stronger balance sheets able to rescue
those with low capital and high leverage is shrinking,” analysts
at JP Morgan

“Now that the balance sheet strength of Alameda Research and
FTX is under question only a few months after being perceived as
strong balance sheet entities, it creates a confidence crisis
and reduces the appetite of other crypto companies to come to
the rescue.”

READ MORE: ‘Crypto voters’: Can they influence US elections?

Source: TRTWorld and agencies

Cryptocurrency
markets have nursed heavy losses with bitcoin pinned
near a two-year low as investors fretted about the fallout from
the implosion of crypto exchange FTX.

FTX head Sam Bankman-Fried said on Thursday he was “exploring all
the options”, but fading hopes for rescue left FTX teetering. 

A
message on the FTX website said: “FTX is currently unable to
process withdrawals. We strongly advise against depositing.”

Larger rival Binance walked away from a bailout deal on Wednesday.

Focus is on the unknown size of customer losses and the hit
to sentiment from the latest and possibly largest collapse in an
industry that has turned into a minefield for investors.

FTX’s native token, FTT is down 90 percent this week and
was attempting to steady around $2 – not terribly far above its
record low around $1.50. Bitcoin fell below $16,000
for the first time since late 2020 overnight and was last at
$16,435.

Binance backed out of a non-binding offer to buy FTX after
due diligence. Another exchange, OKX, said it was also
approached by Bankman-Fried this week, who described liabilities
of $7 billion that needed covering quickly.

“Even Elon Musk would not be able to commit to a deal with
$7 billion liability within a few hours of negotiations. That
was too much for us,” Lennix Lai, director of financial markets
at OKX told Reuters news agency.

“(It) is a big hole to plug,” he added. “The dagger will
continue to hang over the crypto market, as long as the outlook
of FTX’s fate remains unclear.”

The Wall Street Journal reported that Bankman-Fried told
investors FTX needed $8 billion to cover withdrawals. FTX did
not respond to a request for comment.

READ MORE: Digital asset heists: 2022 set to be biggest year for crypto hacks

Confidence crisis

There are also early signs that the fallout could spread
beyond crypto markets, with jittery stock markets sliding on Wall
Street overnight.

“A top exchange failing – that’s on a different level,” said
Danny Chong, CEO of decentralised finance firm Tranchess, with
potentially wider ramifications than the failure of stablecoin
TerraUSD and crypto hedge fund Three Arrows Capital this year.

“People’s funds, including market makers’, are still
currently with FTX,” he said. “Just when people were thinking
that crypto winter might probably not last … along comes
another episode like this.”

The U.S. securities regulator is investigating FTX.com’s
handling of customer funds and crypto-lending activities,
according to a source with knowledge of the inquiry.

Bloomberg reported that the US Department of Justice is
also looking into the turmoil. A DOJ spokesperson declined to
comment.

Investors are already writing off funds ploughed into FTX.
Venture capital fund Sequoia Capital wrote down a $150 million
exposure to zero on Wednesday. Canada’s Ontario Teachers Pension
Plan, Tiger Global and Japan’s Softbank are also FTX investors.

Most crypto players remain bullish about the long term but
are braced for further falls in the near future. Bitcoin’s
20 percent losses this week are comparable to the drop in June when
Three Arrows Capital came under stress.

“What makes this new phase … problematic is that the
number of entities with stronger balance sheets able to rescue
those with low capital and high leverage is shrinking,” analysts
at JP Morgan

“Now that the balance sheet strength of Alameda Research and
FTX is under question only a few months after being perceived as
strong balance sheet entities, it creates a confidence crisis
and reduces the appetite of other crypto companies to come to
the rescue.”

READ MORE: ‘Crypto voters’: Can they influence US elections?

Source: TRTWorld and agencies