New Delhi ,
On Tuesday, Sam Bankman-Fried, chief executive of US cryptocurrency exchange FTX, tweeted that the company had reached a “strategic transaction” with Binance, under which the latter would acquire all of FTX’s non-US assets. The move, detailed as a non-binding letter of intent to Binance founder Changpeng Zhao “to help cover the liquidity crunch” caused the valuations of most major cryptocurrency tokens to plummet. Now, experts believe the crash could do further damage to the already ailing cryptocurrency industry. in India.
On Tuesday, FTT, FTX’s crypto token on the exchange, saw its value drop by more than 80% at the end of Tuesday, as low as $3.77. While it has remained roughly the same value as of Wednesday, its crash echoed the massive demise of stablecoin project Terra this May, with the Terra blockchain-linked stablecoins losing more than 99% of their valuations.
Ether, which started at around $1,575 on Tuesday, was trading at around $1,200 at 4 p.m. Wednesday, down nearly 24% in less than 48 hours.
BTC, the official token of the bitcoin blockchain, fell below $17,000 on Wednesday for the first time in two years – down nearly 18% from $20,660 at the start of Tuesday.
Most other publicly traded tokens on exchanges globally have similarly declined.
A spokesperson for the homegrown Web3 startup, CoinDCX, which also runs an exchange, said in a statement that the crash pulled global cryptocurrency valuations below $1 trillion after a nearly six-week run in which BTC hit $20,000. level and the global valuation crossed $1 trillion.
To be sure, at its peak of market valuation this February, the global cryptocurrency industry was valued at over $3 trillion.
“There will be some impact of the market downturn due to FTX. The key issue here is that FTX used its investor money and kept its token, FTT, to raise debt and fund its own investments. As a crypto exchange, this always leads to a liquidity risk, which FTX should have been aware of,” said Satwik Viswanath, chief executive of domestic crypto exchange, Unocoin.
He added that Indian crypto exchanges have liquidity issues, and the latest crash may add to the same, at least momentarily.
“There have been some signs of recovery in trading volumes over the past six weeks, but the latest crash may halt this progress,” he added.
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