Binance CEO: Don't Relax. Crypto Crisis Is Not Over

Binance CEO: Don’t Relax. Crypto Crisis Is Not Over

15 November 2022

Changpeng Zhao has warned investors that FTX’s dramatic collapse will not be the last in the digital currency industry.

The millionaire, known as CZ due to his overwhelming impact on the crypto industry, is in charge of Binance, the business he co-founded that is the world’s largest cryptocurrency and digital asset exchange in terms of trading volumes.

To remind you what happened the previous week is that massive withdrawals from clients created FTX’s liquidity problem on November 6 when Binance revealed its plan to sell $500 million worth of FTT, the cryptocurrency produced by FTX, in response to press concerns about the group’s financial condition.

Then his main competitor, FTX, ran into financial difficulties and faced serious liquidity challenges. Zhao stepped in momentarily and offered to buy the crypto brokerage.

However, the purchase was canceled less than a day after Zhao did preliminary due diligence on FTX, headed by Sam Bankman-Fried, worth $15.6 billion as of November 7, according to the Bloomberg Billionaires Index.

After that, FTX filed for Chapter 11 bankruptcy on November 11, and Bankman-Fried, who owns FTX and trading platform Alameda Research, resigned as CEO. 

Zhao warned that the $1 trillion cryptocurrency sector is facing a collapse similar to the 2008 financial crisis, which took down investment bank behemoths Lehman Brothers and Bear Stearns.

According to him, the failure of FTX is the first of many, and other crypto firms may soon follow FTX. “With FTX down, we will witness cascade consequences,” Zhao stated at an Indonesian conference. “Those who are close to the FTX ecosystem will be most harmed.”

He predicted that news regarding the downfall of similar crypto firms would come soon. “A few additional companies will be in a similar scenario.” “I believe it will take a few weeks for most of them to come out,” Zhao said.

After these dramas, Bitcoin has seen its values fall by 20%, while Ethereum has fallen by 22.5% owing to the FTX catastrophe.

Zhao also doubts that FTX could buy Voyager’s assets now, a crypto lender that is also insolvent. The $1.4 billion agreement was reached in September, and FTX, as we can get, “clearly… will not have the money.”

On November 11, Voyager halted the deal and resumed the bidding process, saying it is “in active conversation with potential bidders.” The bankrupt lender presently has $3 million locked up in FTX, “significantly comprising locked LUNA2 and locked SRM.”

Another prominent crypto trading firm, Genesis, stated that its derivatives business has $175 million locked on FTX’s exchange but that the money is not substantial to its business and would have no influence on its market-making or trading activities.

However, Zhao predicted that the sector would recover at some time, noting that “the market will cure itself.” We will see, then.

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