Weekly Crypto Update Weekly Crypto Update Weekly Crypto Update

Binance steps away from FTX – contagion is on the horizon

Cryptocurrencies 6 minutes to read

Summary:  Binance has decided not to acquire FTX upon due diligence of the firm. It seems plausible that FTX cannot satisfy its liabilities in terms of mainly customer deposits. This may lead to contagion and reduced liquidity across the crypto market.


Binance decided yesterday evening not to acquire troubled crypto exchange FTX upon due diligence of the firm, citing… the issues are beyond our control or ability to help”. This follows after the two firms signed a letter of intent on Tuesday for Binance to acquire FTX, with the potential acquisition now scrubbed.

It now seems plausible that FTX has a serious hole in its balance sheet, effectively meaning it cannot fully satisfy its liabilities mainly with respect to customer deposits. This is possibly the reason for Binance stepping away from the potential acquisition of FTX. According to Bloomberg, FTX faces an up to $8bn shortfall. Bloomberg states that FTX may file for bankruptcy if the firm does not get a cash injection. This follows after FTX earlier this year allegedly transferred at least $4bn, including customer funds, to keep its highly linked trading firm Alameda Research afloat, according to Reuters. Please keep in mind that not much information is publicly available as of now, so the situation may change.

These events are altogether negative for the crypto market – and possibly other markets. It may lead to contagion throughout the crypto market, as not only FTX and Alameda may now be insolvent but other firms linked to FTX and Alameda as well. As previously one of the largest crypto market makers, it seems that Alameda has ceased much of its trading activities, ultimately decreasing the liquidity in the crypto market. Upon the enlarged uncertainty, various counterparts are likely to reduce risk across the crypto industry by e.g., reducing credit lines, which may reduce the liquidity further. We expect the increased volatility in the past couple of days to continue in the foreseeable future, as the market simply does not know what to expect, so please act cautiously.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.