Trading of cryptocurrencies FTX fell to an unexpected liquidity constraint of its own on Tuesday and consented to be acquired by rival Binance, months after appearing to be a shining survivor in a faltering industry
The relationship between Binance and FTX has always been rocky. Binance invested in FTX early on, and afterwards the company received venture capital from well-known figures in Silicon Valley. The two exchanges intensified their rivalry.
Untill the previous weekend. After declaring he wouldn’t “assist persons that lobby against other industry players behind their backs,” Mr. Zhao tweeted on Sunday being the 6th of Nov. that Binance would liquidate its $580 million worth of FTT assets over the coming months.
On Nov. 8 both CZ and SBF announce the acquisition citing a liquidity crunch indicating that Binance equity liquidation led to FTX’s bankruptcy. FTX CEO chooses a bailout from the competitor that trigger the bank run, wrote a user on Twitter considering the legal alternatives the exchange has during the liquidity crises which are (a) To seek emergency debt financing (b) Seek new money investment (c) Liquidate assets (d) buy time
The deal relies on the regulatory approval and it is uncertain whether antitrust problem will arise from the deal.
Binance signed a non-binding letter of intention, declaring the intention to buy FXT.
This agreement signifies a change in the balance of power in the cryptocurrency industry, which has been harmed by increasing interest rates and investors’ aversion to risk.
The abrupt turn in FTX’s fortune emphasizes the brittleness and unpredictability of the cryptocurrency markets, which have been under increased scrutiny from investors, regulators, and others because to their potential to expose investors to significant losses.
With the addition of FTX, the cryptocurrency market has become even more consolidated, with Binance emerging as the undisputed titan. This implies that Binance will have a greater impact on businesses and traders who deal in crypto currencies.