Moneycontrol Pro Panorama | Fault lines are running deep in crypto world
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The Crypto world has been shaken again, but this time around, the fragility of the crypto ecosystem is thoroughly exposed.
Tremors were felt on Sunday when Binance CEO Changpeng 'CZ' Zhao tweeted that Binance would dump their entire holdings in the cryptocurrency exchange FTX. The FTX cryptocurrency token lost 40 percent in value in 24 hours, causing a rout across crypto markets as contagion fears spread.
Crypto investors fear another meltdown similar to that which crashed crypto hedge fund Three Arrows Capital in July.
Ironically, within days of causing a run on the exchange, CZ tweeted: "This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding letter of intent (LOI), intending to fully acquire FTX.com and help cover the liquidity crunch. We will be conducting a full due diligence (DD) in the coming days."
Call it a shrewd business acquisition or fragility in the crypto space, one tweet was enough to shake the environment. Earlier, Elon Musk used to move the crypto markets with his tweets, but those never resulted in an acquisition. CZ managed to acquire a competitor, the fifth largest in the space, for a fraction of the cost.
The tweet also resulted in a loss of $50 billion in the market value of cryptocurrencies. According to coinmarketcap.com, the combined crypto market cap fell by over 5 percent in the last 24 hours to $965 billion — below the psychological $1 trillion level.
A cause for concern is
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