Eyes are on the crypto market today as the fued between Binanace and FTX turns to full-scale warfare.
The Block reports that FTX appers to have stopped processing withdrawals, citing on-chain data.
"The last outgoing transaction from FTX on the Ethereum blockchain took place at 6:37 a.m. ET, more than two hours ago, data from Etherscan show. It's a similar story on the Tron and Solana blockchains as well, on-chain data show."
FTX's token is down 22% today.
Some background here.
Bitcoin is down 5% today at ethereum -7.5%.
One of the great takes from the crytpo world is that it's slowly learning all the lessons of the modern banking system. For hundreds of years, rumors about insolvency in banks led to bank runs.
The old line is "what do you do when there's a lineup outside your bank? ... get in it".
It's the same with FTX. There have been too many rug pulls in the space that the 'better safe than sorry' is the default mode. In a Machiavellian move, Binance CEO Changpeng Zhao offered the same kind of hint about his decision to sell his stake in FTT.
What makes me sure that it wasn't entirely about risk management was him turning down Bankman-Fried's offer to buy it all at $22.
By selling it on the free market, he invites everyone else to do the same and to undermine it.
Add in the thousands of influential people who want to see crypto collapse and are spreading rumors of insolvency, then it simply compounds.
Again, this same kind of thing happened 80 years ago in the banking sector all the time. The rumors took slower to spread but the threat of losing all your savings is existential for people.
What happened? It wasn't until government-backed bank insurance (like the US FDIC) that it finally stopped. The problem for crypto is that something similar is unthinkable.
Another way to solve it is transparency on the balance sheet but now you have FTX, which is the biggest name in the industry, and there are problems with transparency. That reputational damage is irreperable, no matter what happens in this episode.
On the other side, can this story about Binanace breaking Iran sanctions be a coincidence?
Yesterday, I wrote that I was encouraged that bitcoin and ethereum were holding up despite the obviously bad news. That was a bad take. It was just a stupid, slow market and shorts were a layup. This gets worse before it gets better.
I don't know how true this pausing of withdrawals is (I mean, it's been 3 hours) but when rumors spread, they don't stop and neither will the selling.