Topline
Bitcoin fell to a two-year low and the crypto market slid after a shocking run on billionaire Sam Bankman-Fried’s FTX cryptocurrency exchange and subsequent pact for an acquisition from rival Binance, as the crypto industry shook from the collapse of one of its foremost institutions.
It’s been a chilly week for Sam Bankman-Fried’s FTX.
Key Facts
Binance CEO Changpeng Zhao announced early Tuesday that his company signed a letter of intent to acquire FTX due to a “significant liquidity crunch” at Bankman-Fried’s firm.
The instability at one of crypto’s most trusted institutions sent related assets tumbling, and bitcoin tanked 11% to $18,300 Tuesday, a nearly 75% loss from its peak of just under $68,000 last November.
Other currencies crumbled as well, with the second-most valuable crypto token Ethereum falling 16% Tuesday and FTX’s coin falling a whopping 79%, arriving at a market capitalization of just over $1 billion compared to its $14 billion valuation in March.
Publicly-traded crypto stocks tanked, with shares of exchange Coinbase and MicroStrategy, a tech company heavily exposed to bitcoin, each falling 10% or more Tuesday.
The crypto collapse coincides with a generally strong time for the stock market: The S&P 500 rose 0.6% Tuesday and is up 6% over the last month, compared to respective 6% and 1% losses for bitcoin and ethereum.
Big Number
$6 billion. That’s the amount of withdrawals requested by FTX users between Saturday and early Tuesday, Bankman-Fried wrote in a note to employees viewed by Reuters. The FTX boss promised in a Tuesday tweet “all assets will be covered 1:1” but it “may take a bit to settle.”
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 Sunday 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 loomed over much of 2022, marked by bitcoin’s falter, 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 embattled crypto lender BlockFi in July, entering an agreement to acquire the company, and offered a $200 million credit line to Voyager Digital in June.
Crucial Quote
“Today is a bad day in crypto,” OANDA analyst Edward Moya wrote in a Tuesday note. “This is a major setback for many investors in cryptos who viewed [Bankman-Fried] as a white knight and one of the leaders in the space that was supposed to thrive once we got beyond this crypto winter.”
Tangent
Bankman-Fried donated $39.9 million to Democratic causes ahead of Tuesday’s midterm elections, placing him among the 10 largest individual political donors in the country.
Further Reading
Binance Intends To Acquire FTX (Forbes)
FTX Token Plummets 31%, Exchange Appears To Have Paused Withdrawals (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2022/11/08/crypto-crash-intensifies-amid-downfall-of-industrys-white-knight-bankman-fried/