Binance Chief Changpeng Zhao Warns of a ‘Cascading’ Crypto Crisis

The billion-dollar digital asset market is facing a crisis akin to the financial crash of 2008, according to Binance chief Changpeng Zhao, who warned that more companies could go bankrupt in the coming weeks. following FTX disorders.

Zhao, founder of the world’s largest digital asset exchange, said the full impact of the collapse of rival crypto exchange FTX has yet to be felt. Speaking at a conference in Indonesia, he said the global financial crisis was “probably an exact analogy” to events this week.

“As FTX drops, we will see cascading effects,” Zhao said. “Especially for those who are close to the FTX ecosystem, they will be negatively affected.”

The comments come as crypto traders fear further waves of contagion after a bid by Zhao to buy FTX earlier this week collapsed, leaving one of the biggest cryptocurrency exchanges on the verge of collapse. the collapse. Its failure would also deal a blow to blue-chip investors who had taken stakes in the group, including venture capital firm Sequoia and Japan’s SoftBank.

Bitcoin, the largest cryptocurrency, has lost 17% in the past five days, hitting a two-year low amid tumultuous negotiations between Binance and FTX chief executive Sam Bankman-Fried.

Bankman-Fried apologized for the liquidity crisis at FTX, but did not provide a detailed account of what caused it.

“This lack of transparency is what every trader and investor will be very careful about in the future,” said Anatoly Crachilov, managing director of Nickel Digital Asset Management.

Zhao also questioned a deal FTX made to buy the assets of another crypto lender, Voyager, out of insolvency, saying FTX “obviously . . . won’t have the money” for the transaction. of $1.4 billion.

“A few other projects are going to find themselves in similar situations. I think it will take a few weeks for most of them to come out,” Zhao said.

Genesis, a major crypto trading firm, said its derivatives business had about $175 million locked on the frozen exchange. The company said the funds were “not material to our business” and would not impact its market making or trading functions.

But the Binance chief was confident that the crypto sector would eventually recover. “The market will heal itself,” Zhao said.

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