Cryptocurrency market rocked by near-collapse of exchange

The digital assets market has been rocked by the near-collapse of one of the world’s biggest cryptocurrency exchanges, FTX.

On Tuesday, FTX struck a bailout deal with larger rival Binance after a surge in withdrawals triggered a “significant liquidity crunch”.

Concerns about FTX’s financial health reportedly triggered $6bn (£5.2bn) of withdrawals in just three days.

Under a non-binding agreement, Binance will buy FTX’s non-US unit.

FTX’s founder Sam Bankman-Fried and Binance’s chief executive Changpeng “CZ” Zhao are two of the most powerful people in the cryptocurrency market and high-profile 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.

“Due to recent revelations that have came 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”.

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.”

“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%.

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