Robert Steinadler, 25 days ago

Battle of the Titans: Binance to acquire FTX

Please note this is a rapidly developing story, this post is from Nov 8. Not all information may be up to date.

After shocking 48 hours and a tanking FTT price both billionaires came to an agreement. Binance entered a preliminary agreement to help FTX with a liquidity crisis that was induced to some extend by what appears to be a business move that was made by Binance CEO Changpeng “CZ” Zhao only one day earlier.

Why is FTX giving up the fight and what kind of impact is to be expected on FTX and FTT in the coming weeks?

FTX ran dry on money and assets

CZ announced yesterday that Binance will sell more than $500 million in FTT, after raising concerns over the liquidity of FTX in public. This caused a bank run and while we cannot judge whether FTX was indeed facing insolvency, we know through several user reports on social media that withdrawals were disabled or postponed.

After going through an extensive crisis in May and June starting with the collapse of Terra followed by the Celsius bankruptcy most investors had no risk appetite for yet another billion-dollar business to fail. The sheer number of withdrawals that could be tracked on-chain had epic proportions. Billions of Dollars in crypto were moved and it comes apparent that some of the FTX wallets were running dry.

Alameda Research and FTX are separate entities, but it seems that their ties were so close that Sam Bankman-Fried couldn’t risk one without risking to lose the other.

Binance enters a preliminary agreement

According to CZ, Binance has entered an agreement to fully acquire FTX.com and is willing to help out on the liquidity crisis of the damaged exchange. It is important that Binance has the right to pull out of the deal at any time and no other details of the agreement were made public.

Again, we can only take the word of both CEOs and according to them everything is going to be fine for the users of FTX. However, should Binance chose for some reason to pull out of this deal, it is not clear what would happen to FTX and its customers.

The situation is still more than tense, which is reflected by the tanking price of FTT despite the ceasefire between both billionaires. Even though both parties trying to keep their face it is becoming more obvious that Alameda and FTX might have been in a situation that was way worse than anybody thought it would be. What is more concerning for the industry as a whole is the reputation damage that was caused by the public attempt to hurt a competitor even though it might end without any more collateral damage to be done.

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