Market Analysis: Crypto markets traded wildly throughout the day as investors seek answers to a multitude of questions about Binance's proposed acquisition of crypto exchange rival FTX. GWilliamsJr_CMT reports
Binance’s mega-deal to buy rival FTX has raised lots of questions among investors, few of them with easy answers. Price fluctuations have been difficult to pinpoint on calm news days, and the blockbuster deal announced Tuesday threatens to roil markets well beyond the volatility of the last few hours.In a surprising turn of events, Binance is fully acquiring FTX. The two entities entered a non-bonding letter of intent , to help FTX weather an apparent liquidity crunch.
that prompted the sudden sale. Too much of FTX’s net equity consisted of its own FTT token, raising concerns among some crypto observers as CoinDesk reported.FTX’s problems stem from the all-too-familiar cocktail of leverage and liquidity, particularly when there’s too much of one and not enough of the other.
The spread between “earn” and prevailing risk-free rates imply the use of leverage and risk to create surplus yield. But this combination can become increasingly problematic if an entity must meet increases in user withdrawals. That appears to be exactly what FTX was facing.Should crypto investors be wary or hopeful? The individual or entity who speaks with the most confidence on price direction likely deserves the highest level of skepticism.
Both moves came with higher-than-average volume implying that bulls and bears have conviction. Technical indicators are changing by the hour, so prudent investors will wait patiently without reading too much into any of them.
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