Binance deal with FTX will have a 'seismic' impact on Coinbase - analysts

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By Senad Karaahmetovic

The cryptocurrency market somewhat stabilized on Wednesday after significant selling occurred on Tuesday amid mounting concerns about the stability of the U.S.-based digital asset exchange FTX.

Bitcoin price is down about 2.5% today as the bears try to push the price below the $18,000 mark once again after the world’s largest digital asset hit a fresh 2-year high yesterday.

A breach of $18,000 would represent a significant concern for the bulls as this level is an important technical support for the Bitcoin price. If the break occurs, there’s practically not much standing in the way for the bears all the way until the $14,000 zone.

FTX’s native coin, FTT, collapsed on Tuesday after the world’s largest crypto exchange Binance said it will sell its FTT holdings. Moreover, FTX saw its clients withdraw about $6 billion in the 72 hours before the deal with Binance was agreed on Tuesday afternoon. The China-based digital exchange agreed to acquire non-U.S. operations of FTX in a non-binding deal.

At 03:45 EST (08:45 GMT), FTT is nearly 17% on the day.

The FTX mess expectedly spilled over to the rest of the cryptocurrency market with Coinbase (NASDAQ:COIN) closing more than 10% lower on Tuesday. For Bernstein analysts, the Binance-FTX deal represents a “seismic shift in COIN's competitive landscape.”

“A Binance-FTX combination means significant consolidation and a global crypto powerhouse in crypto trading, spot and derivatives. This also means a formidable international position, which is a growth market for COIN,” the analysts told clients in a note.

If the deal ultimately goes through, Binance could get a significant boost from the empowered position in the international market to scale its investment in its U.S. sister company Binance.US, the analysts further note.

The analysts also noted that the FTX-Binance deal is likely to go through “at a much lower valuation” relative to the $32B that FTX was last valued earlier this year. This is also seen as “a negative read-across for COIN's valuation benchmarking.”

Similarly, Mizuho analysts said the deal represents a "red flag" for Coinbase given that the vast majority of revenues are from trading crypto tokens.

"While less competition is a positive, the user overlap with FTX is smaller than many believe. More importantly, the rapid fall from grace of a crypto exchange demonstrates how fickle the crypto industry could be," they said.