Crypto Crash Intensifies Amid Industry ‘White Knight’ Bankman-Fried
Top line
Bitcoin fell to a two-year low and the crypto market rumbled after a shock run on billionaire Sam Bankman-Fried’s FTX cryptocurrency exchange and subsequent pact for an acquisition by rival Binance, as the crypto industry reeled from the collapse of one of its premier institutions. .
It’s been a chilly week for Sam Bankman-Fried’s FTX.
Keywords
Binance CEO Changpeng Zhao announced early Tuesday that his company signed a letter of intent to acquire FTX due to a “significant liquidity crisis” at Bankman-Fried’s firm.
The instability at one of crypto’s most trusted institutions sent related assets tumbling, and bitcoin fell 11% to $18,300 on Tuesday, a loss of nearly 75% from its peak of just under $68,000 last November.
Other currencies also crumbled, with the second most valuable crypto token Ethereum falling 16% on Tuesday and FTX’s coin falling a whopping 79%, reaching a market cap of just over $1 billion compared to its $14 billion valuation in March.
Publicly traded crypto stocks rallied, with shares of Coinbase and MicroStrategy, a technology company heavily exposed to bitcoin, each falling 10% or more on Tuesday.
The crypto collapse coincides with a generally strong time for the stock market: The S&P 500 rose 0.6% on Tuesday and is up 6% over the past month, compared with 6% and 1% losses for bitcoin and ethereum, respectively.
Big number
6 billion dollars. That’s the amount of withdrawals requested by FTX users between Saturday and early Tuesday, Bankman-Fried wrote in a memo to staff seen by Reuters. The FTX manager promised in a Tuesday tweet “all assets will be covered 1:1” but it “may take some settling.”
Key background
Binance’s helping hand comes after a bitter back-and-forth between Zhao and Bankman-Fried spurred FTX’s collapse, with Zhao announcing on Sunday that his firm would sell all of its FTX holdings due to “recent revelations,” which Bankman-Fried dismissed as a “competitor … trying to go after us with false rumors.” The so-called “crypto winter” has emerged over much of 2022, marked by bitcoin’s wobble, widespread layoffs and bankruptcies at several notable firms, including Three Arrows Capital and Celsius. But the 30-year-old Bankman-Fried had previously been a massive stabilizing force in the industry, with his FTX extending $650 million to struggling crypto lender BlockFi in July, striking a deal to buy the company and offering a $200 million line of credit. to Voyager Digital in June.
Decisive quote
“Today is a bad day in crypto,” OANDA analyst Edward Moya wrote in a Tuesday note. “This is a big setback for many investors in cryptos who saw [Bankman-Fried] as a white knight and one of the leaders in the space that should thrive once we get past this crypto winter.”
Tangent
Bankman-Fried donated $39.9 million to Democratic causes ahead of Tuesday’s midterm elections, placing him among the top 10 individual political donors in the country.
Further reading
Binance intends to acquire FTX (Forbes)
Ahead of the crypto firm’s cash crunch, billionaire Sam Bankman-Fried spent tens of millions on politics (Forbes)
Bitcoin Falls Below $20,000 After Twitter Brawl Between Billionaire Crypto Executives Triggers Withdrawal From FTX (Forbes)
FTX Token Plunges 31%, Exchange Appears To Have Paused Withdrawals (Forbes)
