Binance’s acquisition of throws the market into chaos

The crypto-currency market is reeling from the prospect that Binance’s acquisition of FTX could mean that Sam Bankman-Fried’s exchange and his close associate, Alameda Research, are potentially insolvent.

FTX in free fall

The market is plummeting following the recent announcement of the acquisition of FTX by Binance. At the time of writing, BTC is down 10.85% and trading at around $18,300, meaning that the leading crypto-currency is currently at the same price level as it was at the beginning of the summer; it has already threatened to break the range downwards. Ethereum, meanwhile, has plunged 15.37 percent and is trading at $1,320.

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This brutal price action is due to FTX’s recent admission that the exchange was experiencing a cash crunch: the insolvency was so severe that Sam Bankman-Fried, the company’s CEO, agreed to sell FTX to rival crypto-currency exchange Binance for an undisclosed amount.

While the acquisition is certainly good news for FTX users who feared their funds would be frozen on the exchange, this revelation implies that FTX and quantitative trading firm Alameda Research (also founded by Bankman-Fried) are unlikely to meet their obligations in the event of a recall by their creditors.

This has caused some crypto-tokens associated with FTX and Alameda to plunge, with FTT (FTX’s native token) being the first of these. The coin is down 80%.At the time of writing, it is trading at $4.5: a drastic drop considering that Caroline Ellison, CEO of Alameda, promised to help Binance sell off its FTT supply for $22 just two days ago. SOL and other major Solana-based tokens such as SRM are down 21% and 25%, respectively, after being strongly supported by Bankman-Fried until now.

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Meanwhile, Binance’s own stablecoin, BUSD, has jumped by to trade at $1.01, despite the fact that it is designed to always maintain a 1:1 parity with the U.S. dollar. BNB, the native Binance token, is also doing well considering the circumstances, as it is only down 6.8%. The coin had previously risen 24% following the announcement of Binance’s acquisition of FTX.

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