Crypto Crash Intensifies Amid Industry ‘White Knight’ Bankman-Fried

by Arthur · November 8, 2022

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Top line

Bitcoin fell to a two-year low and the crypto market rumbled after a shock run on billionaire Sam Bankman-Fried’s FTX cryptocurrency exchange and subsequent pact for an acquisition by rival Binance, as the crypto industry reeled from the collapse of one of its premier institutions. .

It’s been a chilly week for Sam Bankman-Fried’s FTX.

Virgile Simon Bertrand/Forbes Collection

Keywords

Binance CEO Changpeng Zhao announced early Tuesday that his company signed a letter of intent to acquire FTX due to a “significant liquidity crisis” at Bankman-Fried’s firm.

The instability at one of crypto’s most trusted institutions sent related assets tumbling, and bitcoin fell 11% to $18,300 on Tuesday, a loss of nearly 75% from its peak of just under $68,000 last November.

Other currencies also crumbled, with the second most valuable crypto token Ethereum falling 16% on Tuesday and FTX’s coin falling a whopping 79%, reaching a market cap of just over $1 billion compared to its $14 billion valuation in March.

Publicly traded crypto stocks rallied, with shares of Coinbase and MicroStrategy, a technology company heavily exposed to bitcoin, each falling 10% or more on Tuesday.

The crypto collapse coincides with a generally strong time for the stock market: The S&P 500 rose 0.6% on Tuesday and is up 6% over the past month, compared with 6% and 1% losses for bitcoin and ethereum, respectively.

Big number

6 billion dollars. That’s the amount of withdrawals requested by FTX users between Saturday and early Tuesday, Bankman-Fried wrote in a memo to staff seen by Reuters. The FTX manager promised in a Tuesday tweet “all assets will be covered 1:1” but it “may take some settling.”

Key background

Binance’s helping hand comes after a bitter back-and-forth between Zhao and Bankman-Fried spurred FTX’s collapse, with Zhao announcing on Sunday that his firm would sell all of its FTX holdings due to “recent revelations,” which Bankman-Fried dismissed as a “competitor … trying to go after us with false rumors.” The so-called “crypto winter” has emerged over much of 2022, marked by bitcoin’s wobble, widespread layoffs and bankruptcies at several notable firms, including Three Arrows Capital and Celsius. But the 30-year-old Bankman-Fried had previously been a massive stabilizing force in the industry, with his FTX extending $650 million to struggling crypto lender BlockFi in July, striking a deal to buy the company and offering a $200 million line of credit. to Voyager Digital in June.

Decisive quote

“Today is a bad day in crypto,” OANDA analyst Edward Moya wrote in a Tuesday note. “This is a big setback for many investors in cryptos who saw [Bankman-Fried] as a white knight and one of the leaders in the space that should thrive once we get past this crypto winter.”

Tangent

Bankman-Fried donated $39.9 million to Democratic causes ahead of Tuesday’s midterm elections, placing him among the top 10 individual political donors in the country.