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FTX: Cryptocurrency market rocked by near-collapse of exchange

The near collapse of one of the world’s largest cryptocurrency exchanges, FTX, has shaken the digital assets market.Information Guide Nigeria

After a surge in withdrawals caused a “significant liquidity crunch” on Tuesday, FTX reached a rescue agreement with its larger competitor Binance.

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In just three days, $6 billion (£5.2 billion) in withdrawals were reportedly triggered by concerns about the financial health of FTX.

Binance has agreed to acquire FTX’s international operations, pending due diligence.

The founder of FTX, Sam Bankman-Fried, and the CEO of Binance, Changpeng “CZ” Zhao, are two of the most influential individuals in the cryptocurrency market and prominent rivals.

The pressure on FTX came in part from Mr Zhao, who tweeted on Sunday that Binance would sell its holdings of FTX’s digital token, known as FTT.

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“Due to recent revelations that have come to light, we have decided to liquidate any remaining FTT on our books,” he said. FTT has lost almost 80% of its value this week.

On Tuesday Mr Zhao tweeted, “This afternoon, FTX asked for our help. There is a significant liquidity crunch.”

Binance said it had signed a letter of intent to buy the firm but had “the discretion to pull out from the deal at any time”.

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Also on Twitter Mr Bankman-Fried said: “Our teams are working on clearing out the withdraw backlog as is. This will clear out liquidity; all assets will be covered 1:1.”

“The important thing is that customers are protected… We are in the best of hands,” he added.

Mr Bankman-Fried also noted that FTX’s US business was a separate company and “not currently impacted by this”.

The cryptocurrency world is full of big personalities and Sam Bankman-Fried is one of the biggest.

Since the “cryptocrash” in the spring, the young, outspoken, owner of FTX has been a beacon of hope to investors large and small.

While other companies have faltered, Bankman-Fried seemed to be thriving.

In the last six months, the 30-year-old had given out generous rescue packages for struggling firms, secured lucrative acquisitions, and taken part in high-profile media interviews.

As revelations about his company’s fragile finances came to light in reporting by CoinDesk, those outspoken interviews are now coming back to bite him.

“More crypto exchanges will fail,” he said in one interview adding that some firms are “secretly insolvent”.

Now it seems his company joins the growing list of cryptocurrency businesses that have failed thanks to a recurring problem – a lack of cash reserves.

FTX is not the first firm to succumb to the so-called “crypto winter” we are in but it is by far the largest.

“This is a black swan event that adds more fears in the crypto space. This cold winter for crypto now takes on more fear,” Dan Ives, senior equity analyst at Wedbush Securities told the BBC.

The news sent shockwaves through the digital assets market, with cryptocurrencies falling sharply.

Bitcoin fell by more than 10% to hit the lowest level since November 2020.

Meanwhile, online trading platform Robinhood lost more than 19% of its stock market value, while cryptocurrency exchange Coinbase fell by 10%.JAMB Result

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Emediong Silver

Emediong Ekpe is a graduate of English. A professional Sports journalist/analyst, and a spoken word artist. He is passionate about decimating information and putting smiles on people's faces via news writing.

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