Crypto Market Bleeds Further As World¡¯s Largest Crypto Exchange Binance Gets Poised To Buy Rival FTX

In what seems to be a stunning 'bailout' that has raised fresh concerns among investors about cryptocurrencies, world¡¯s biggest crypto exchange Binance signed a nonbinding agreement yesterday to buy rival FTX's non-U.S. unit to help cover a "liquidity crunch" at FTX.

Tuesday's developments about Binance acquiring FTX have left FTX investors scrambling to figure out what the deal means for their investment in FTX, according to people familiar with the matter, as per Reuters report.

The deal between the two high-profile rivals- Sam Bankman-Fried, who is the CEO of one of the world¡¯s biggest crypto exchanges FTX, and Binance CEO Changpeng Zhao, came out as speculation about FTX's financial health snowballed into $6 billion of withdrawals in the 72 hours before Tuesday morning.

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It was Binance CEO Zhao¡¯s tweet last Sunday which played a part in putting the pressure on FTX, mentioning that Binance would liquidate its holdings of the rival's token due to unspecified "recent revelations."

The move, which is a dramatic reversal in fortunes of ¡®crypto robinhood¡¯ and billionaire Bankman-Fried, is an emergency rescue in the world of cryptocurrencies, amidst the crypto market bleeding to a large extent this year. From its peak of hitting $3 trillion in November 2021, the crypto market has fallen massively and lost around $2 trillion.

Rift Between The Two CEOs

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Tensions between Zhao and Bankman-Fried had surfaced in recent days, with a public disagreement playing out on Twitter, following a report by news website CoinDesk on a leaked balance sheet from Alameda Research, a trading firm founded by Bankman-Fried that has close ties with FTX as per Monycontrol report. In August 2022, Alameda Research's Sam Trabucco had resigned from his position as co-CEO of FTX.

The CoinDesk report showed that FTX's trading arm, Alameda, had $14.6 billion in assets. However, most of the assets on the balance sheet were FTX's own FTT tokens. This ignited rumours of a possible insolvency at Alameda began to circulate.

As the rumours emerged, Binance received $585 million in FTT (FTX tokens) as part of its liquidation. Binance CEO Zhao later reportedly revealed that this was a deliberate action.

Amidst the deal¡¯s news coming out, the pace of withdrawals in the past few days has proved to be too much, as per FTX CEO. "On an average day, we have tens of millions of dollars of net in/outflows," Bankman-Fried wrote in a message to staff sent on Tuesday morning, saying how that amount had run into billions.

Binance CEO Changpeng Zhao and FTX CEO Bankman Fried currently have a networth of $17.4 billion and $16.6 billion respectively, as per Forbes.

What Binance & FTX¡¯s CEOs Tweeted

In a note to investors late on Tuesday, which was shared on Twitter and verified by a source familiar with the situation, FTX CEO Bankman-Fried tried to reassure FTX investors, saying that "protecting shareholders is our highest priority" but said details of the deal were "still being hashed out."

Here's the series of tweets by FTX CEO yesterday.

2) Our teams are working on clearing out the withdrawal backlog as is. 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. It may take a bit to settle etc. -- we apologize for that.

¡ª SBF (@SBF_FTX) November 8, 2022

4) A *huge* thank you to CZ, Binance, and all of our supporters. This is a user-centric development that benefits the entire industry. CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world.

¡ª SBF (@SBF_FTX) November 8, 2022

6) (Note that https://t.co/fCrWGQ4y7w and https://t.co/Ju8CkfrLYH¨Ctwo separate companies¨Care not currently impacted by this. https://t.co/fCrWGQ4y7w¡¯s withdrawals are and have been live, is fully backed 1:1, and operating normally.)

¡ª SBF (@SBF_FTX) November 8, 2022

This came amidst a tweet announcing the deal on Tuesday, Binance's Zhao that FTX had "asked for our help" after "a significant liquidity crunch."

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.

¡ª CZ ? Binance (@cz_binance) November 8, 2022

Bankman-Fried said his teams were working on clearing out the withdrawal backlog: "This will clear out liquidity crunches. This is one of the main reasons we've asked Binance to come in."

"A *huge* thank you to CZ, Binance," Bankman-Fried wrote.

How The Crypto Market Is Reacting To The Deal

The crypto market has been bleeding amidst the news of Binance acquiring FTX, with many investors resorting to panic selling.

FTX token, which gives holders discounts on FTX trading fees and is the native currency of FTX crypto exchange, is down over 74% in past 24 hours, trading at $4.7, whereas. Bitcoin is down around 8% in past 24 hours, trading at $18,129.97,as per Coinmarketcap data. Ethereum is down around 15% in past 24 hours, trading at $1,262.82 today.

What Next?

World's biggest crypto exchange Binance will conduct due diligence in coming days as the next step toward the acquisition of FTX, as per Reuters report. The U.S. operations of Binance and FTX are not part of the deal, said FTX CEO Bankman-Fried, who is from California but lives in the Bahamas where FTX is based.

However, all may not be that smooth as the U.S. antitrust enforcers could reportedly insist on probing the merger, antitrust experts said. Moreover, Binance is also under investigation by the U.S. Justice Department for possible violations of money-laundering rules, Reuters reported last week, one of a series of investigations this year into Binance's troubled history with financial regulatory compliance.

A spokesperson for the U.S. Commodity Futures Trading Commission said the agency is monitoring the situation, as per the report.

Also Read: How The 'Bitcoin Beach' In Portugal Has Remained Busy & Optimistic Despite Crypto Market Meltdown

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