Binance had announced plans to acquire its major rival FTX in a move that has shocked the crypto space.
Binance, the world’s leading cryptocurrency exchange, is set to acquire FTX, one of its major competitors. This latest development comes as a shock to most crypto enthusiasts due to FTX’s status in the market.
Changpeng Zhao, Binance’s CEO, announced yesterday that it had signed a letter of intent (LOI) with FTX and will acquire the crypto exchange and take on its liabilities.
This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire https://t.co/BGtFlCmLXB and help cover the liquidity crunch. We will be conducting a full DD in the coming days.
— CZ 🔶 Binance (@cz_binance) November 8, 2022
While commenting on this latest development, Timo Lehes, co-founder of Swarm, a regulated DeFi platform, told Coinjournal that Binance’s status means it is now too big to fail. Leches said;
“This level of consolidation makes Binance too big to fail. Their success is now crucial to the systemic operations of the crypto industry, given that more than half of global spot trades and a large chunk of crypto derivatives business is transacted across both exchanges. It is no secret that Binance is trying to increase its regulatory footprint and the FTX acquisition advances that strategy.
“The timing of the deal is interesting as it comes less than 24 hours after Binance pulled its liquidity from FTX. The events of the last 24 hours highlight the lack of transparency as a centralized phenomenon. It was those monitoring on-chain activity who pointed out strange ongoings with FTX wallets, prompting the rumor mill on Twitter to unfold and putting pressure on the FTX team for answers. Had there been more transparency and less convolution around FTX’s operations, perhaps this would have caused less FUD and put SBF and his team in a stronger position. If the deal does go through, a consolidation of this size will be unprecedented in the crypto space — ironically, one that values decentralization and transparency.”
The series of events began after Binance’s CEO said the exchange would liquidate its entire position in FTT tokens. Binance holds $584 million in FTT tokens and decided to sell in the open market over the next few months, rejecting the offer by Alameda Research to sell the assets to them.
Alameda Research is a hedge fund owned by FTX founder Sam Bankman-Fried. CZ argued that it had to liquidate its position in FTT to avoid a similar situation it experienced with LUNA earlier this year.
This resulted in a panic, with traders and investors seeking to withdraw their funds from FTX. FTX had to pause withdrawals on its platform yesterday as it scrambled to facilitate customer withdrawals and preserve confidence.
Binance and FTX eventually agreed on a deal that will see Binance acquire the latter and handle its liabilities. The acquisition puts Binance ahead of the other cryptocurrencies by miles, making it the undisputed leader in the crypto space.