Coffeezilla: FTX Collapsed… Here’s Why

Cryptocurrencies hit 52-week lows back in June, only to start to move higher. The drop was due in part to the collapse of overleveraged crypto brokerage platforms. Those firms have since gone into bankruptcy.

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This week, cryptos retested those lows. The move occurred as Binance made a non-binding offer to acquire FTX. This potential merger of two of the world’s largest crypto brokers spooked investors once again. Especially as the news followed rumors that FTX had liquidity problems.

The move also came after the two brokerage firms had a war of words online before the news.

That’s led to a major drop in crypto prices this week. Much like the June lows, this seems to be the result of some insolvent funds having to cash out quickly of illiquid tokens.

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With binance appearing to take advantage of a lack of liquidity at FTX, it’s any guess as to when a merger will be completed. It also doesn’t help reassure investors when FTX froze withdrawal from the platform at the peak uncertainty.

While the final fallout from this may not have played out yet, it will continue to drive investors away from smaller crypto projects. That may bode well for major cryptos like bitcoin and Ethereum. But even their recovery will take some time.

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