Binance abandons its FTX takeover plan as crypto reels from the whiplash
The best-laid plans… still require due diligence. About 24 hours after the world's largest crypto exchange said it would acquire its collapsing rival, Binance said the deal to purchase FTX was off. One possible reason: Binance got a look at FTX's books and spotted a reported shortfall of up to $8B. The about-face sent crypto markets tumbling (again):
- Blockdrain: Yesterday bitcoin fell under $16K to a two-year low as the fleeting hope that FTX would get bailed out dissipated.
- Faultcoins: Altcoins weren't spared from the FTX-odus. Ether, dogecoin, and XRP all dropped more than 14%.
- It's unclear if (or when) FTX customers will get their money back. FYI: FTX’s US biz, which makes up 5% of its revenue, wasn't part of the planned deal.
Decentralized déjà vu… With Binance out, FTX could be on the verge of bankruptcy. Crypto followers might feel like they’ve seen this show before: over the past year, crypto lenders including Celsius have declared bankruptcy. Earlier this year FTX founder Sam Bankman-Fried (aka SBF) bailed out companies like BlockFi and Voyager that were felled by crypto winter. The industry once viewed SBF as its "white knight" riding in to save companies. Now SBF’s own company may need saving.
The aftershock could be bigger than the quake… Plunging crypto prices turn heads, but SBF's and FTX's sudden unraveling presents a larger reputational problem for crypto. The 30-year-old CEO (and political mega donor) was the face of crypto lobbying efforts on Capitol Hill. With so much regulation up in the air, FTX's implosion might sour crypto-friendly lawmakers. But if it leads to clearer US crypto regulation, it could benefit investors and ultimately fortify the industry's reputation.