The largest cryptocurrency exchange in the world, Binance, has changed its mind about buying the struggling FTX.COM.
Exactly one day after Binance disclosed a deal to acquire its rival, this happened. It had previously hinted that it might still cancel the agreement pending further investigation, but that choice has since been made.
When the company asserted that factors outside of their control were preventing the FTC acquisition on Wednesday, it all but confirmed its decision to withdraw.
According to Binance, the decision to pull out of the deal was made after conducting corporate due diligence and learning that authorities were looking into allegations of improper handling of investor funds.
We have made the decision not to pursue the potential acquisition of http://FTX.com in light of our corporate due diligence and the most recent news reports regarding improper handling of customer funds and alleged US agency investigations.
We had hoped to assist FTX’s clients in providing liquidity at first, but we are unable to do so due to the problems.
Retail customers will suffer every time a major player in an industry falters. We have observed that the cryptocurrency ecosystem is strengthening over the past few years, and we are confident that in due course, the free market will root out outliers who abuse user funds.
The ecosystem will become more robust as regulatory frameworks are created and the industry continues to develop toward greater decentralization.
What this implies
In the ten-year history of cryptocurrencies and their propensity for building and destroying value, this U-turn represents yet another significant development.
CZ, the founder of Binance, recently opined that the choice to acquire FTX was essential for maintaining confidence in the cryptocurrency market.
In addition, he stated that the choice was made to “help protect users and help cover the liquidity crunch” in the event that FTX failed.
Pulling out suggests that FTX may be on the verge of going out of business, which would bring down the entire cryptocurrency market.
On Wednesday, the price of bitcoin dropped 15% to $15.7k as investors sold off millions of tokens they had purchased.
The bloodbath might only be getting started, and there’s concern that it might extend beyond cryptocurrencies.
Fear overcame the entire cryptocurrency industry, causing Ether, Binance Coin, and other altcoins to all fall.
Just to mention, media outlets are claiming that FTX is in the red by about $8 billion and may soon file for bankruptcy.
The demise of FTX.COM may have caused a global contagion that affects not only cryptocurrencies but also traditional debt markets.
Investors are already concerned about which international banks may have direct and indirect exposure to FTX.
Be on guard.