Binance Dumps FTX After Seeing Its Poor Financial Condition

Binance, the biggest crypto exchange, said it would walk away to acquire FTX after reviewing its smaller rival's financial condition, according to the latest report.

Is FTX Over?

The gap between FTX's assets and liabilities is more than $6 billion and there is a huge liquidity crisis at FTX and its sister company Alameda Research. FTX’s largest asset was revealed to be $3.66 billion in locked FTT, the native token of the crypto exchange. Its third biggest asset was $2.16 billion in FTT collateral. That means, over $5 billion of the company's assets are FTT, which raises questions about its financial health.

Yesterday, Binance CEO Changpeng "CZ" also questioned the collateral of FTT, saying: ''Two big lessons: 1: Never use a token you created as collateral. 2: Don’t borrow if you run a crypto business. Don't use capital "efficiently". Have a large reserve. Binance has never used BNB for collateral, and we have never taken on debt.''

Additionally, US regulators are investigating FTX's handling of customer funds, and its relationship with other parts of Bankman-Fried's crypto empire, such as FTX US and Alameda Research.The crisis doesn't end here as most of the FTX's legal and compliance staff have left the firm.

FUD Across The Crypto Market

The news has caused fear, uncertainty and doubt across the crypto market as investors don't know what's going to happen with their funds. There is deep red in the crypto market, with Bitcoin down more than 10%, trading at $16, 940, and Ether at $1,194 with an 11% drop over the last 24 hours.

In the past 24 hours, FTT, the native token of the FTX exchange, has fallen 25%, trading at $3, while Solana, the second-largest holding for Alameda, has fallen 37%, hovering around $14.55.

The crisis at FTX has sparked speculation that crypto could see a Terra-like collapse. On Twitter, #cryptocrash became a popular trend today as experts expressed their concerns over the ongoing drama between Binance and FTX.

The Bottom Line

When Binance announced that it would acquire FTX, the crypto market was relieved that a crisis would not occur. Now that Binance has dumped FTX, the crisis at cryptocurrency exchanges has worsened as the SEC is also involved.