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Destructive fall

Binance Backtracks, BTC and Ether Plummet

Binance announced on Wednesday that it is abandoning its intentions to buy FTX, which was valued at $32 billion earlier this year and is now in danger of failing. The turmoil led to Bitcoin and ether trading below 16200 and 1100 respectively. Investors await a higher October consumer price index even as tech firms continue with massive layoffs.

Binance Backtracks On Deal With FTX Causing Ripples In The Market

Sam Bankman-crypto Fried’s empire is on the verge of disintegrating as a result of Binance withdrawing from its plans to acquire FTX, the business announced on Wednesday.

One day earlier, Binance CEO Changpeng Zhao revealed that the world’s biggest cryptocurrency company has struck a non-binding agreement to acquire FTX’s non-U.S. operations. enterprises for an undisclosed sum, saving the business from a cash shortage. Private investors put FTX’s value at $32 billion earlier this year.

In the beginning, Binance said in a tweet on Wednesday, “our objective was to be able to serve FTX’s customers to provide liquidity.” But we are unable to intervene or control the problems.

According to people with knowledge of the situation, Bankman-Fried was frantically trying to gather money from venture capitalists and other investors on Monday night before he went to Binance because of a liquidity crisis. 

Zhao initially consented to help, but his business swiftly changed its mind, citing accusations of “mishandled customer monies and purported U.S. agency investigations.”

Who is next in line to purchase the troubled cryptocurrency exchange is unknown. According to a person acquainted with the situation, Bankman-Fried informed investors that the company is in need of emergency funding due to a shortfall of up to $8 billion caused by withdrawal requests.

The collapse of the Binance-FTX transaction is the most recent episode in a startling implosion that has shaken the cryptocurrency community this week. Just on Monday, Bankman-Fried made an effort to convince investors that the company’s assets were secure. 

However, the selloff started after Binance’s Zhao announced publicly that his company was selling its holdings in FTX’s native token FTT, and FTX was unable to stop it.

On Tuesday, Bankman-Fried reported that $6 billion worth of withdrawal requests had been made by consumers. Additionally, he removed tweets from the day before that said FTX had sufficient funds to cover clients’ shares.

Earlier on Wednesday, Zhao said in a memo to the Binance staff that he “did not master plan” the demise of FTX. Employees should not “see it as a success for us,” he added, adding that FTX’s demise is “not beneficial for anyone in the industry.”

Between Monday and Tuesday, FTT already lost 80% of its value, dropping to $5 and wiping out more over $2 billion in a single day. On Wednesday, it dropped by more than half to about $2.30, bringing the entire market value of the tokens in circulation down to about $308 million.

Bitcoin Tumbles

In the midst of the deal turbulence, cryptocurrency prices have tumbled, with bitcoin plummeting 15% on Wednesday after losing 13% on Tuesday. For the first time since November 2020, it is currently trading below $16,000.

BTC was trading at roughly $16,200 as Asian markets started, down about 11% over the previous 24 hours but a significant improvement from earlier in the day when it appeared to be going toward $15,000. 

BTC/USD 1-hour candle chart-Nov 09

BTC/USD 1-hour candle chart-Nov 09

Following the swift collapse of the world’s largest cryptocurrency exchange, FTX, which experienced a liquidity issue and was later abandoned by would-be rescuer Binance, the slide extended bitcoin’s downward trend this week.

A similar pattern was followed by ether, which dropped more than 30% in the last two days to close below $1,100 for the first price since mid-summer before reclaiming a small portion of the lost ground. 

The market value of the second-largest cryptocurrency was recently trading at around $1,140, down more than 12% from Tuesday at the same time. ETH’s price had been circling about $1,500 for the previous two weeks. 

Tech Firms Layoffs Affecting Investments

Everyone including investors dislikes hearing about layoffs since it is upsetting to watch coworkers cope with a sudden loss of money. The sinking sensation of having to change course and find another source of income is not a pleasant experience for individuals who endure a layoff.

Layoff announcements from businesses are typically a bad omen for the economy. Along with other big businesses like Intel, a few tech behemoths have announced impending layoffs.

Microsoft made significant layoff announcements earlier this week, with worker reductions anticipated across several areas. Around 1,000 workers are anticipated to lose their jobs in the layoffs. TechCrunch estimates that less than 1% of Microsoft’s substantial workforce of 182,000 will be affected by these layoffs.

As the Facebook parent dug down on its risky metaverse bet amid a collapsing advertising market and decades-high inflation, Meta Platforms Inc (META.O) announced on Wednesday that it would eliminate more than 11,000 jobs, or 13% of its staff.

The major layoffs, which are among the largest this year and the first in Meta’s 18-year history, come on the heels of thousands of job cuts at other internet firms like Snap Inc., Twitter Inc., controlled by Elon Musk, Microsoft Corp. (MSFT.O), and Twitter Inc.

Like its competitors, Meta actively recruited during the epidemic to handle an increase in social media use by customers who were stranded at home. However, as a result of advertising and consumers cutting down on purchases due to skyrocketing prices and quickly rising borrowing rates, the business has suffered this year.

According to conventional thinking, layoffs are essential to preserving a company’s long-term viability during a recession. Because of this widespread belief, many stocks tend to increase following a layoff announcement. However, a layoff frequently has detrimental long-term effects. 

US CPI data for US Release

According to Dow Jones, economists anticipate that the consumer price index for October increased by 0.6% from September or 7.9% from a year ago, up from 0.4% or 8.2% annually in September. 

Core CPI without food and energy is anticipated to have increased by 0.5%, or 6.5% annually. This is less than September’s 0.6% growth, which was a 6.6% annual pace.

As a crucial report for the Federal Reserve, the CPI will be announced on Thursday at 8:30 a.m. The Feds will meet in the middle of December and is widely anticipated to raise its fed funds target rate by a half percentage point. 

Earnings Updates

On earnings news, there are major companies expected to deliver their earnings results on Thursday to investors before the markets open or close. Some of the key earners will include AstraZeneca PLC, whose consensus EPS forecast for the quarter is $0.77, and Brookfield Asset Management Inc. with an EPS forecast for the quarter is $0.72.

On Friday, banking and financial services companies, Sumitomo Mitsui Financial Group Inc, and Mizuho Financial Group, Inc. will report their earnings alongside Honda Motor Company, Ltd., an automobile manufacturer.

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Author

  • Zahari Rangelov

    Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.