Binance buys FTX, revenge explained

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After two hours without news from FTX, and while users of the cryptocurrency exchange platform could no longer carry out transactions such as withdrawals, place at the epilogue of the conflict between Binance and FTX. On Twitter, Binance boss Changpeng Zhao (known by the initials CZ) and FTX boss Sam Bankman-Fried (known by the initials SBF) have jointly announced what will be the largest operation of consolidation of the year. Binance will acquire 100% of FTX, its competitor.

“There is a major liquidity crisis”wrote CZ, before adding that “to protect users, we have signed a non-binding letter of intent, intending to fully acquire FTX com”. SBF to continue: “We are in good hands. […] I know there have been rumors in the media of conflict between our two exchanges, but Binance has shown time and time again that they are committed to a more decentralized global economy while striving to improve relations between the two exchanges. industry with regulators”.

Here is the outcome of a conflict between the two platforms that will have lasted more than three years, and during which things have accelerated in recent hours around the debate on the solvency of FTX, then particularly dependent on its FTT token. Following an incriminating article published by CoinDesk, CZ had made the decision to resell its US$2.1 billion equivalent in FTX’s native cryptocurrency, which was deemed particularly risky. Following this decision, its price fell by 30% overnight.

FTT Price November 2022

© CoinMarketCap

FTT, according to CZ and several experts, could have dragged FTX to the bottom of the hole in the event of a market jolt and a sudden loss in value of the cryptocurrency. CZ accused the competing exchange of being insolvent, in other words that it could not reimburse its customers in the event of a hard blow. Binance’s choice to part with the tokens was then part of a “risk management” policy, following the lessons learned from the Terra Luna affair and the Celsius platform. The ad had cast a chill. SBF, touched, then addressed Binance by speaking only of “a competitor” and a targeted attack.

The conflict between Binance and FTX

Whether FTX is solvent or not, its resilience has been particularly demonstrated in recent months with the crypto winter. In a series of interviews, notably with our colleagues from The Big Whale in France, SBF had announced the arrival of a native stablecoin and also said it was motivated to continue to invest big, and why not by calling on external growth. But the conflict behind Binance and FTX goes back to the origin of the two platforms. Hard to understand at first glance, when even CZ decided to invest in FTX in its early days.

Let’s go back to 2019 and Binance’s strategic investment in FTX. At that time, the cryptocurrency exchange was already aiming to rise to the top, but with CZ’s intelligence, the goal was no more to get bigger than to protect itself, monitor the market, and enjoy support parallel projects… like FTX. The months went by and SBF, deceptively close to CZ, no longer hid its interest in growing and why not, one day, overtaking Binance.

All shots were allowed, until October 2022, when SBF did not hesitate to point the finger at CZ, born in China, on his potential affinities with the government. Crypto platforms being particularly dependent on the American market, there was no question of alienating the authorities, and raising suspicions about Binance for FTX was a way of destabilizing its opponent, indeed a competitor.

Binance’s revenge

“It’s a big blow from CZ. He waited for the right moment. After the market hysteria, no one wants to take risks anymore,” was trying to analyze a user on Twitter. Well Named. To exact revenge on FTX, Binance wanted to show a benevolent aspect by stepping away from its exposure on FTT. CZ declared on Twitter that in order not to have too big an impact on the price of FTX’s cryptocurrency, his company was going to sell its tokens little by little. However, it is indeed the equivalent of 584 million dollars that have already been sold in recent hours.

The snowball effect was not long in coming. Without a takeover announcement as a lifeline, CZ’s decision might well have caused FTX to implode. But without CZ’s announcement, Binance would certainly have found it increasingly difficult to be able to engage in a strategy of destruction like the one we can follow today. The platform may have carried out 10 times more transactions, but FTX still rose to second position in the ranking of the largest exchanges, its plans with its stablecoins and its sustained growth were enough to alert Binance.

More information to come…



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