It's difficult for me to overstate just how WILD the past 24 hours have been in the wacky world of cryptocurrencies. Remember last night's Nightcap, when I said it was a jaw-dropping news day? Well, take yesterday and chuck it in a blender and then burn the house down, and that's what today was.
Here's the deal: Yesterday, it seemed as if FTX, the crypto exchange founded by Sam Bankman-Fried, had found a savior in the unexpected form of its biggest rival, Binance.
But concerns about whether the deal would actually happen weighed on investors and sparked a broad selloff in digital assets. All day, news began to trickle out that Binance was getting cold feet.
Finally, Binance announced it was walking away from the deal it had struck just 24 hours earlier, casting FTX's future (and SBF's crypto empire) into an uncertain future.
What happened?
Apparently, FTX was in worse financial shape than anyone anticipated. As part of the due diligence on the deal, Binance was able to review FTX's books. In a statement, Binance said FTX's problems were "beyond our control or ability to help."
According to the Wall Street Journal, Bankman-Fried told investors Wednesday that he needs emergency funding to cover a shortfall of up to $8 billion due to withdrawal requests received in recent days. Without an immediate cash infusion, FTX, which once fetched a $32 billion private valuation, could go bankrupt.
Now, crypto companies are a dime a dozen, and they rise up and flame out all the time. But FTX is different. Since its founding in 2019, it has become one of the most successful and trusted exchanges of its kind. Bankman-Fried, known to insiders as SBF, had emerged as the public face of the entire sector, appearing in ads alongside Gisele Bündchen and drawing comparisons to Warren Buffett and J.P. Morgan for his role in shoring up struggling crypto firms.
What happens next isn't clear. After the Binance deal fell apart, FTX.com briefly went offline. When it reappeared, a bright red banner warned customers that the exchange had halted withdrawals and urged people not to make any deposits. Investors of all stripes could see their funds evaporate.
Virtually all digital assents sank Wednesday over the turmoil at FTX.
Bitcoin sank below $16,000, its lowest level in two years, after Binance confirmed it would not buy FTX. The crypto has fallen more than 75% from its all-time high near $69,000 a year ago. Ether, the second most popular token, fell about 13% to $1,137 — also off 75% from its record high.
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