2022-11-12 23:00 |
On November 2, 2022, the Fed raised its key interest rates by 75 basis points for the fourth time this year, bringing the target range for the federal funds rate to 3.75 to 4 percent. Immediately following the Fed rate announcement, the price of Bitcoin remained above US$20,000, as the markets had anticipated an interest rate hike of this magnitude.
A few days following the latest Fed interest rate hike, the price of Bitcoin even rose to over US$ 21,000. However, the Bitcoin price rally was short-lived following insolvency rumours at the FTX crypto exchange. CoinDesk had reported that Alameda Research, a trading firm founded by Sam Bankman-Fried (SBF), founder and CEO of FTX, held a significant amount of FTT tokens on its balance sheet.
In a tweet, Binance CEO Changpeng Zhao (CZ) stated that Binance Exchange would liquidate all its FTT token holdings. FTT is the token issued by FTX. Binance’s decision to liquidate its FTT tokens led to a fall in the token’s price and a liquidity crisis on the FTX platform.
CZ confirmed in a tweet that FTX approached Binance for help on the liquidity crunch it was facing and that the two crypto exchanges had signed a non-binding letter of intent (LOI) to fully acquire FTX pending full due diligence (DD) in the coming days.
SBF said in a tweet: “Things have come full circle, and http://FTX.com’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for http://FTX.com (pending DD etc.)”.
In October 2022, SBF proposed a regulatory framework for crypto as the industry awaits regulation. The regulatory framework, which called for tighter crypto regulation, drew several concerns from the crypto community, especially on the economic freedom offered by crypto. SBF consequently agreed to revise some of his earlier proposals.
Falling crypto prices in 2022 have caused financial stress to several crypto companies. Embattled crypto companies have turned to their peers for financial assistance. In June 2022, FTX had offered to bail out the embattled crypto firm BlockFi with a revolving credit facility, whilst Alameda Research had offered to provide financing to the digital asset brokerage firm Voyager Digital.
As a result of Binance’s decision to abandon its plans to acquire FTX, which was announced on Wednesday, Sam Bankman-cryptocurrency Fried’s empire is on the verge of complete collapse.
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