FTX has always been visible and popular, mainly due to its CEO and founder Sam Bankman-Fried’s highly optimistic crypto predictions. But recently as FTX’s financial health declined, Binance, the world’s largest cryptocurrency exchange in terms of trades, seemed ready to lend a helping hand. However, on November 9, the plan changed with the company announcing that it will not be acquiring the ailing FTX.
Earlier this year, FTX was valued at nearly $32 billion but on Monday its tokens fell below $5 from $22, wiping over $2 billion in a day.
The Binance and FTX Saga
When Binance appeared willing to bail out its rival, it had a detrimental effect on FTT, the token native to crypto exchange FTX. The coin lost over $2 billion within a space of 24 hours. Binance CEO Changpeng Zhao predicted the worst, saying that he expected FTT to be highly volatile in the coming days.
Binance revealed that it backed out of the deal due to “mishandled customer funds,” which it discovered during its review of FTX’s financials. “In the beginning, our hope was to be able to support FTX’s customers to provide liquidity,” Binance said in a tweet on November 9. “But the issues are beyond our control or ability to help.”
The dissolution of the deal leaves FTX’s future in limbo. Bankman-Fried is well-known for his optimism with regards to crypto, being the single-largest Democratic donor, and plans to give his wealth to charity. All plans have to be put on hold, as the crypto crisis has come for FTX, wiping away his billionaire status. He has lost over 94% of his fortune, amid a liquidity crunch.
In a letter to investors, Bankman-Fried wrote, “I’m sorry I didn’t do better, and am going to do what I can to protect customer assets, and your investment.”
Previously, he had campaigned for better regulatory frameworks for digital assets.
According to a person familiar with the matter, Bankman-Fried informed investors that the company is facing a shortfall of up to $8 billion from withdrawal requests and needs emergency funding.
Crypto’s Cryptic Future
Some VCs have reiterated the need for decentralization as FTX collapses. The Allied Market research report, however, predicts that the crypto market will pick up pace and be worth nearly $5 billion by 2030. This change will be fueled by greater transparency in global payments systems and see fast growth.
Some investors believe that regulation will help crypto take greater strides and mitigate the crypto crisis. But finding the right balance where crypto can maintain its singularity despite regulation can be tough. For this reason, crypto evangelists support regulation from big firms and crypto exchanges, over governments.
While regulation might shape crypto’s future, the coin’s inherent volatility and the entry of big players can affect the market. On the other side, experts are also worried about how regulation will impact the overall crypto economy. The number of cryptocurrency has increased exponentially in the past two years. Further, 50% of crypto owners would like to start using it to pay for online shopping.
In the last few years, even institutionalized investors have ventured into crypto. And while crypto’s anonymity and volatility helped it thrive, it has also become its bane.
Recent predictions by experts also echo the sentiment that crypto will gradually rise to dominate the industry. According to the Bitcoin rainbow chart, Bitcoin will hit six figures by late 2024. In April, crypto lending firm Nexo’s CEO Antoni Trenchev told CNBC that Bitcoin will surge above $100,000 per coin within the next 12 months. But despite great predictions, Bitcoin has not managed to hit its past high of around $69,000 and continues to hover below the $20,000 mark.
As the stock market and crypto market flounders, only time will tell how crypto will fare in the future. What is undeniable is the fact that a lot of work must be done to balance risks and the rewards, and to offer security to customers.
