In the latest crypto news, Binance, the world’s largest cryptocurrency firm, has agreed to buy rival cryptocurrency exchange FTX for an undisclosed sum, rescuing the company from a liquidity crisis.
Binance CEO Changpeng Zhao tweeted Tuesday morning that “there is a significant liquidity crunch” at FTX and that after FTX requested Binance’s assistance, Binance agreed.
Changpeng Zhao stated, “There is a lot to cover and will take some time. This is a highly dynamic situation, and we are assessing the situation in real-time. Binance has the discretion to pull out from the deal at any time. We expect FTT to be highly volatile in the coming days as things develop.”
Tensions Built Up Between Two Figureheads
The weekend saw tensions brew between Binance CEO and FTX CEO Sam Bankman-Fried, as Zhao announced that it would be dumping $529 million worth of FTX’s native FTT token.
The announcement led to Zhao undermining confidence in FTX’s finances, where Twitter rumours about FTX being insolvent began to spread. Bankman-Fried later went on to say on Twitter a day before accepting the Binance deal that assets on FTX were “fine.”
While there have been few details presented on behalf of Binance regarding the acquisition, after the buyout announcement, CZ tweeted, “1: Never use a token you created as collateral. 2: Don’t borrow if you run a crypto business. Don’t use a capital ‘efficiently.’ Have a large reserve.”
Aftermath
After the announcement on Monday, FTX received approximately $6 billion in withdrawals in the 72 hours preceding the acquisition announcement Tuesday morning, according to Reuters, citing a message sent to staff by Bankman-Fried.
“Our teams are working on clearing out the withdrawal backlog,” said Bankman-Fried on Twitter. “This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in.”
Bankman- Fried stated in a tweet on Tuesday that the Binance deal has not “currently impacted” the company’s US-based affiliate, FTX US. However, policy analysts believe that the debacle will strengthen calls from lawmakers and agencies to regulate crypto firms more heavily.
Barron’s tried to reach out to both Binance and FTX for further information, but spokespeople from both exchanges declined to comment.
As news of the Binance-FTX deal was formulating, Cryptocurrencies prices fell again, renewing trader concerns that trouble is brewing within the industry and among some of its key players.
Bitcoin, the largest cryptocurrency by market capitalization, fell as much as 17% to approximately $17,172, its lowest level since November 2020. Almost every digital asset, such as Ethereum, Polkadot, and Avalanche, fell more than 14%, while Solana and Dogecoin fell more than 28%.
