Bitcoin and other cryptocurrencies sell off as Binance's stunning takeover of FTX renews liquidity fears in the sector
- Bitcoin and most other cryptocurrencies were down Tuesday after Binance's stunning announcement that it will acquire FTX.
- FTX Token crashed 84%, and Binance's BNB also reversed earlier gains sharply to turn negative.
Bitcoin and most other cryptocurrencies were down Tuesday as Binance's stunning announcement that it intends acquire FTX renewed liquidity fears in the industry.
The global value of the overall crypto sector fell 12% over the last day to $911 billion, according to CoinMarketCap. Bitcoin lost 12%, ether sank 17.5%, and dogecoin tumbled 25%.
FTX Token crashed 84%, and Binance's BNB also reversed sharp earlier gains to turn negative, falling 9%.
"To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch," Binance CEO Changpeng Zhao tweeted.
Zhao added that the deal was pending his firm's ability to conduct due diligence over the FTX purchase and the exchange itself.
Financial terms weren't disclosed, but FTX founder and CEO Sam Bankman-Fried tweeted, "Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we've asked Binance to come in."
A liquidity crisis plagued his exchange earlier in the week amid steep declines in FTX Token. A report from CoinDesk last week said that FTX-owned Alameda Research's balance sheet relied heavily on FTT, adding to worries that the two arms of Bankman-Fried 's empire were reliant on illiquid crypto as opposed to cash or other liquid assets.
FTX's liquidity issues come after the crypto sector crashed in the spring, after the implosion of Terra's stablecoin UST sparked a series of collapses across the industry.
About $2 trillion in crypto market value was wiped out after hitting a last November, and the sector has yet to bounce back from the so-called crypto winter.