Worsening Situation – FTX Collapse 😧

Worsening Situation – FTX Collapse

Just yesterday, we talked about how once-famous crypto firm FTX collapsed due to a liquidity drawback, and how their rival Binance plans to acquire them to gain in the market while saving the business. In another turn of events, Binance has now decided to step back from the so-called “bailout plan” and end the acquisition, stating that FTX’s financials are unacceptable and beyond the stage of being able to help. The acquisition was supposed to be the thing that saved FTX, but now they are truly in a state of freefall. CEO Sam Bankman-Fried said that they are facing bankruptcy and are in pursuit of emergency funding now.

FTX’s financial situation is dire, facing a shortfall of around $8 billion. The impact of this situation is far greater than one would expect; just yesterday, Bitcoin fell by 15 percent, reaching its lowest level in 2 years, and venture capital funds who invested into FTX are getting burned now. Not much can be done about the situation if someone doesn’t produce the $4 billion the company is looking for. As for Binance’s point of view, this decision seems smart given their due diligence is correct as there is no reason to jeopardize the company with an acquisition of FTX. It couldn’t come at a worse time for the crypto industry in this high-rate environment, and regulation is truly becoming a concern now. SEC Chair Gary Gensler issued a warning to crypto firms on Wednesday, comparing them to a collapsing Jenga tower. Just a few months ago, SBF was considered the face of cryptocurrency by the US government, but it now looks like his company will be used as an example to display the high risks involved.

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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

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