How Binance, FTX deal drove crypto markets into a frenzy?

Binance’s native token BNB is currently trading at nearly $310 on CoinMarketCap, at the time of writing. Its market cap is around $49.54 billion. BNB is the most popular cryptocurrency at the moment.

On the other hand, FTX-backed FTT is struggling to hold around $3.4 levels. FTT’s market cap is around $458.17 million.

Why are both BNB and FTT trending?

It all started when a Coindesk report raised alarm about Alameda’s balance sheet whose foundation consisted largely of coins that its sister company FTX invented. This raised the question of whether Solvency in Alameda did not have an independent asset like a fiat currency or another crypto.

According to the report, Alameda’s assets are worth about $14.6 billion — of which — $3.66 billion and locked in FTT, while its third largest assets were worth about $2.16 billion in FTT security. This means that more than $5 billion of Alameda’s assets are FTT.

This led to rumors of insolvency in FTX. But things went further south when Binance announced that they are liquidating their holdings of FTT tokens as they wanted to be cautious after the experience of the LUNA crash. Investors also reacted by offloading their holdings in FTT tokens heavily.

But that wasn’t all. Many reports stated that Binance was looking to buy struggling rival FTX—which could have worked in Bankman-Fried’s favor, but that hope has likely been dashed as well.

According to the Wall Street Journal, people familiar with the matter said Binance reversed course on a rescue bid for FTX on Wednesday, leaving the prominent digital firm with an uncertain future as it faces a shortfall of up to $8 billion.

In the wake of Binance walking away from the FTX deal, BNB is trading 3% higher in the last 24 hours, while FTX is down almost 30%. Over the past seven days, BNB has fallen by over 7%, while the FTX token has fallen by almost 87%. In one month, BNB has given a positive return with an upside of almost 12%, but FTT has fallen by over 86%.

The Binance-FTX deal has rocked the cryptocurrency markets. The largest cryptocurrency Bitcoin fell to its lowest level in two years.

About Malviya, President, Tezos India said, “With Binance rejecting the FTX acquisition deal, it has caused a hyper-VUCA moment for crypto investors globally thereby leading to a massive fall in various cryptocurrency prices.”

Currently, on CoinMarketCap, Bitcoin has cleared the $17,500 mark, while Ethereum is trying to stay above $1,300. However, some losses were recovered late Thursday night with Bitcoin and Ether gaining nearly 2% and over 12% over the past 24 hours. However, Bitcoin’s weekly drop is around 14% and Ether has plunged 15%.

Counterparts XRP, Cardano and Dogecoin are trading higher by 4.5-5.5% in the last 24 hours. But they have tumbled on a weekly basis. XRP has lost nearly 15% in the past seven days, while Cardano and DOGE have fallen 6% and 32% as of now.

There is uncertainty in the crypto markets as many fear that FTX would become another failed story like Terra LUNA which wiped out billions of dollars of investors’ wealth in May this year and even hit the breakeven point.

Malviya added: “After the Terra-Luna crash earlier this year, this fiasco is another wake-up call to remind us to shift our focus towards introducing increased transparency and decentralization.”

Disclaimer: The views and recommendations above are those of individual analysts or brokerage firms, and not of Mint.