ccording to Stephen Innes, managing partner at SPI Asset Management, this could be the "tipping point" for crypto investors after a string of bankruptcies earlier this year.
"It's impossible to deny the growing correlation between Bitcoin and risk assets. The FTX news is having a disproportionate impact on asset prices. FTX has warned investors that it will likely go bankrupt unless more capital is raised. As a result, all ships were sinking in the crypto tumult. Bitcoin spillovers are significant, and given how widely crypto coins are held, it may necessitate more forced liquidation of other assets to cover margin calls as long position investors were caught off guard.”
"Unfortunately, there is no lender of last resort for cryptocurrency buyers. As a result, the selloff could continue as industry liquidation chasers continue to sell a variety of cryptos and native FTX coins to safeguard their downside as the crypto contagion effect roils. Indeed, after a string of major industry insolvencies earlier this year, this could be a watershed moment for cryptocurrency."
Binance stated on Twitter, "As a result of our own due diligence, in addition to the latest news reports concerning mismanaged customer funds and alleged US authority investigations, we have chosen not to pursue the possible future acquisition of FTX.com."
"In the beginning, we hoped to be able to help FTX's customers to provide liquidity, but the concerns are beyond our control or capacity to help," Binance explained, adding that as the crypto space matures, players who misappropriate user funds will be weeded out by the free market.
The tweet comes just a day after Binance CEO Changpeng Zhao confirmed on Twitter that Binance had reached a non-binding agreement to acquire the exchange, which was experiencing liquidity issues. However, Zhao stated in his tweet that his exchange could "pull out of the deal at any time."
On November 7, Zhao posted on Twitter that Binance is liquidating all of its reserves of FTT, FTX's exchange token, contributing to the token's price decline. According to CoinGecko data, worth around $2.52 per token at the time of publication, but it was worth approximately $25 just a week ago.
The balance sheet of FTX's sister company and trading arm Alameda Research, which has US$14.6 billion in assets, was reportedly filled with the FTT token, which has plummeted in recent days, implying that Alameda and closely-related FTX are insolvent.
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*Article Photo Credits to: FTX CEO Sam Bankman-Fried | Image: Getty Images, Envato Elements*