A strange turn of events led to a crash in the price of almost all major cryptocurrencies today following the announcement that FTX would be acquired by rival Binance.
The world’s largest cryptocurrency has lost more than 8% in the last 24 hours and is now trading at around $18,000. Ethereum, the second-largest cryptocurrency, fell more than 16% to $1,200. Polygon’s Matic has taken the most damage of the top ten, losing around 20% in the last day.
How FTX, the King of Bailouts, Fell
FTX established a reputation as the cryptocurrency’s bailout king during the recent crypto meltdown. The platform generously offered millions of dollars in revolving credit to bail out some troubled digital currency platforms.
In an unusual turn of events, the exchange became insolvent and was forced to sell its distressed assets to a competitor. In a tweet, FTX CEO Sam Bankman-Fried stated, “We have reached an agreement with Binance on a strategic transaction for FTX.com.”
Binance CEO CZ provided additional information. “FTX requested our assistance. There is a severe liquidity crisis. To protect users, we signed a non-binding letter of intent (LOI) with the intention of fully acquiring FTX.com “He stated. But how did things get there?
On November 2, CoinDesk reported that it had obtained access to Alameda Research’s balance sheet, which was allegedly loaded with the exchange’s native exchange token FTT.
Following that, Binance CEO Changpeng Zhao announced that the exchange, which had 23 million FTX tokens worth approximately $529 million at the time, had decided to liquidate any remaining FTT on its books.
Following the announcement that Binance would acquire the exchange, FTT sell pressure increased, with the coin falling to as low as $3 from its daily high of $22.
“The fear that Alameda’s shoddy balance sheet was mixed in with FTX’s led to a liquidity crisis and, ultimately, today’s offer by CZ to acquire the exchange,” said crypto veteran Jonathon Wu, adding that FTX has a “seeming multi-billion dollar hole.”