Cryptocurrency market crashes again, here’s why

The cryptocurrency market is once again having a busy week, to say the least. The fault of FTX, a famous trading platform, and the mishaps following an article by CoinDesk. Today, after another panic caused by a surprise announcement from Binance, the entire cryptocurrency market is at its worst. Bitcoin slumped below $16,000, a historic drop for the currency.

And for good reason: On Thursday, November 10, Binance announced via a press release on Twitter that it’s giving up on the takeover of FTX that was promised earlier in the week. “Following the company’s due diligence as well as the latest information regarding mismanaged client funds and alleged investigations by US agencies, we have decided not to pursue the potential acquisition of FTX.”company writes.

FTX is on the verge of bankruptcy, so what?

FTX’s troubles began on November 2, when CoinDesk’s provocative article was published. In it, we learn that FTX’s trading sister company, Alameda’s Reasearch, has $14.6 billion in assets, mostly made up of “unlocked” FTT, FTX’s internal token. creates a potential conflict of interest in the market.

Shortly after these disclosures, Changpeng Zhao, CEO of the world’s leading cryptocurrency exchange Binance, announced the sale of all of its FTTs. This statement causes panic among investors, who have gotten rid of all their FTX-related assets. FTX CEO Sam Bankman-Fried later saw his fortune melt from $14.6 billion to $991 million.

Therefore, the entire cryptocurrency market is in free fall. Bitcoin and Ethereum are falling to their lowest levels in months, despite 2022 being a particularly difficult year for the industry. Finally, a glimmer of hope appears for FTX and its users when Changpeng Zhao sends FTX a letter of intent to take over before everything blows up today.

“Our initial hope was to help FTX clients provide liquidity, but the issues are beyond our control or ability to help.”explained the company before adding this “Press releases regarding mismanagement of client funds and alleged investigations by US agencies” undermined his will to continue the process.

Following Binance’s withdrawal, Sam Bankman-Fried now plans to raise $8 billion in cash from FTX users to fund bulk withdrawals. According to Bloomberg, the company, which was still worth tens of billions of dollars at the beginning of the year, now risks bankruptcy if that fundraising fails.

Disaster for Bitcoin drops below $16,000

As usual, the response from the cryptocurrency market has been swift. Bitcoin, in particular, is going through its darkest hours in two years as it has dropped to just under $16,000. Just a year ago, the currency hit its historic high of $69,000 before being battered by the crash that had raged since last May. According to investment bank JPMorgan, the currency should continue to decline before stabilizing around $13,000.

As for Ether, it is currently around $1100 and has lost more than 20% of its value in just a few days. All this, except for projects directly supported by FTX, especially Solana, who has seen its share price drop to three since the event started. Overall, the market fell below $900 billion.