Binance CEO Says More Cryptos Will Follow FTX and Collapse

Binance CEO Changpeng Zhao compared the current events unfolding around FTX to the start of the 2008 financial crisis and the Lehman Brothers collapse.

Due to the prominence of FTX and its high level of integration within the crypto industry, Zhao expects significant fallout. The Binance founder said he anticipates that more companies will fold as the exchange’s collapse cascades across the industry.

CZ said this would especially be the case for firms “close to the FTX ecosystem.” Describing the global financial crisis as “probably an accurate analogy,” Zhao believes the consequences will be severe. 

Binance CEO role in FTX Downfall

Binance CEO Changpeng Zhao himself played a significant role in the downfall of Sam Bankman-Fried and his companies FTX and Alameda Research. There had been persistent suspicion about the relationship between these two companies, which subsequently came to light.

Earlier this week, Zhao said that his exchange would be liquidating FTX tokens (FTT) from its books. This was triggered by the realization that over a third of Alameda’s $14.6 billion in assets were FTT tokens. This instigated a massive selloff of FTT, despite Bankman-Fried’s best efforts to reassure the markets.

In the ensuing liquidation, Bankman-Fried reportedly reached out to Changpeng Zhao for assistance, which the Binance CEO tentatively provided. However, within a day of announcing a prospective acquisition of FTX, an analysis of its finances caused Zhao to withdraw.

Although Bankman-Fried made efforts to secure alternative funding, he failed and subsequently resigned as FTX filed for bankruptcy. 

One commentator highlighted how closely these proceedings echoed the collapse of Lehman Brothers, which initiated the global financial crisis.

During the weekend of Sept. 13, 2008, Lehman Brothers was in negotiations with rivals Barclay’s and Bank of America to secure a bailout. However, a deal failed to materialize, leading to Lehman shares opening on Monday down 93%, effectively ensuring its bankruptcy.

And the Crypto Dominoes Fall…

Changpeng Zhao believes it will take a few weeks for the impact of the collapse to consummately resonate through crypto and financial markets. However, the dominoes have already started to fall. Zhao remarked that FTX’s $1.4 billion purchase of crypto lender Voyager’s assets would unlikely proceed. 

Amid the turmoil, crypto lending firm BlockFi said it would have to temporarily halt withdrawals, fearing a major liquidation event.

And earlier today, Ren Labs announced that funding it had been receiving from Alameda would be discontinued, jeopardizing its operations.

As the effects of the bankruptcy unfold, similar scenarios are likely to emerge in the coming weeks.

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