Crypto’s self appointed saviour just reached for a lifeline of his own

It was a jaw-dropping, curse-out-loud-at-work type of day in the crypto world, which is a volatile and strange place even on its best days.

Here's how it works: Concerns regarding the stability of FTX, the exchange platform created by Sam Bankman-Fried, nicknamed SBF, kept cryptos down all morning. He's an entrepreneur whose name is frequently associated with words like "wunderkind," "saviour," "white knight," "digital Warren Buffett," and so on. In a nutshell, he is a crypto star (and a 30-year-old billionaire).

SBF has ignored rumours regarding FTX's liquidity issues, even as its larger rival, Binance, announced that it would sell the $580 billion it had invested in FTX's in-house coin.

Then, in a completely unexpected turn of events, Binance announced that it has offered to acquire FTX in order to fix its liquidity problem.

"This afternoon, FTX begged for our assistance," Binance CEO Zhao "CZ" Changpeng tweeted on Tuesday, citing a "severe liquidity shortage."

Given the public fighting and obvious bad blood between Bankman-Fried and Zhao, no one anticipated that surprise coming.

"I'm truly astonished," said one industry executive. "FTX failing would be similar to a Lehman Brothers incident in the space." "However, if they were effectively bailed out, it would probably put a stop to things."

While the transaction is still in the works, a collaboration between FTX and Binance, the two largest crypto exchanges by volume, would represent a seismic shift in the sector.

The announcement caused a temporary rally in digital assets, but it was insufficient to soothe worried investors.

According to CoinDesk, Bitcoin fell more than 10% on Tuesday, reaching a 52-week low of roughly $17,600. FTT, FTX's in-house coin, plummeted to $5.24, losing 75% of its value. Other digital assets and shares associated with the sector, such as Coinbase, have also declined.

SBF is one of the most powerful personalities in the crypto world. During the summer, as digital assets fell in the so-called "crypto winter," Bankman Fried put up $1 billion to bail out enterprises and shore up assets in an attempt to save the entire sector from collapsing. He also served as an unofficial ambassador, promoting the promise of cryptocurrency to a sceptical conventional financial community.

But on Tuesday, the Savior needed to be saved.

Concerns about FTX and Alameda Research, Bankman-trading Fried's firm, arose last week when a report published by news site CoinDesk revealed that FTT, a somewhat illiquid cryptocurrency, took up a large portion of Alameda's balance sheet.

Zhao, the CEO of Binance, fueled such anxieties by announcing that his business will liquidate all of its interests in FTT, totaling $580 million, "because to recent findings." His news frightened investors, causing FTT to fall.

In essence, Bankman Fried received a $580 million capital demand and did not have the cash to satisfy it.

There is still much to learn, but we should expect digital assets to stay volatile until more information regarding the FTX-Binance merger becomes available. According to some observers, the partnership might hasten Washington's push toward crypto legislation.

Crypto may have narrowly averted a Lehman moment, but we're now in unknown terrain, and it's unclear who, if anybody, would bear the next rescue if Binance runs into problems.

$2.04 billion is the number of the day.
Unfortunately, I will not be quitting my day job after all. That honour belongs to the only winner of the record $2.04 billion Powerball jackpot, a fortunate ticket holder in California.

The ticket was purchased at a Joe's Service Center in California, according to the state lottery's Twitter account. A spokesman for CNN said that the winner has yet to appear, and that "someone is hanging on to a very crucial piece of paper this morning."

ON THE VERGE

Much of the world is, understandably, focused with the midterm elections. But Wall Street is already looking ahead to Thursday, when the Consumer Price Index report will provide an updated reading on inflation.

"Obviously, because democracy is on the ballot, this midterm election is a major matter in the eyes of the populace," Peter Tuchman, a senior New York Stock Exchange floor trader, told my colleague Matt Egan. "How much it weighs on the economy is an interesting topic."

In short, only a significant shock may cause the market to respond at this moment. Stocks have risen in recent days, owing to investors' belief that Republicans would gain control of at least one chamber, resulting in a split government.

Division means gridlock. And Wall Street loves gridlock.

In this situation, impasse means Republicans will be unable to pass unfunded tax cuts and Democrats will be unable to pass unfunded spending programmes, both of which would increase already-high inflation and raise interest rates, as Matt argues.

Tuchman believes that "less government and full stalemate will certainly help the stock market."

Several traders warned Matt that Thursday's CPI, probably the most significant economic indicator of the month, may easily eclipse the midterm elections.

"Markets can adapt to almost everything except unknowns," remarked Tuchman. "The inflation narrative is the market's biggest long-term uncertainty."