The collapse of the FTT, the token native of the FTX exchange, created fears of contagion to others and cryptocurrencies, causing the broader markets to plummet. This token collapse is directly related to a withdrawal on the FTX exchange and the rumored lack of liquidity.
Directed by Sam Bankman-Fried, one of the most recognized figures in the cryptocurrency sector, the company seemed to be doing well, but nothing could be further from the truth and Binancehis great rival, wanted to record this.
The standoff between these popular cryptocurrency exchanges dates back to FTX’s purchase of Binance shares in the summer of 2021. Binance, an early investor in FTX, received about $2 billion as part of his exit from FTX capital. The 2,000 million dollars they were paid in FTT, the FTX token.
Since the purchase, Changpeng Zhao, CEO of Binance, and Sam Bankman-Fried have not stopped taunting you via Twitter, until this has gone further.
1) Hey all: I have a few announcements to make. Things have come full circle, and https://t.co/DWPOotRHcX’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for https://t.co/DWPOotRHcX (pending DD etc).
— SBF (@SBF_FTX) November 8, 2022
Initially and with the aim of paralyzing cash withdrawals and that their exchange did not collapse, it reached a rescue agreement with Binance. However, it recently tweeted that the deal was off, due to news reports of mishandling of customer funds at FTX.
This prompted Zhao to decide to announce that Binance would liquidate his $2 billion in FTT, starting with $584 million in FTT on November 6, 2022. With this, chaos was more than guaranteed. And it is that, the pressure of a sale of 2,000 million dollars is unbearable for any exchange.
As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of https://t.co/FQ3MIG381f.
—Binance (@binance) November 9, 2022
Also, This caused the rest of the investors to start selling. All of this led to a further crash in the price of FTT. With this, many investors saw this move as a plot to eliminate their main competitor, although Zhao refuted the idea.
He has denied deliberately creating a liquidity crisis at FTX: “I spend my energy building, not fighting”, tweeted Nov. 7, but Tim Mangnall, whose firm Capital Block has advised both Binance and FTX, says it was a commercial stunt “cunning” of Zhao, who allowed him “buy one of your biggest competitors for pennies.”
Everyone wants more transparency in our industry, right? My tweets were simple. There were questions about a large ($580m) FTT deposit to Binance, and we were transparent about the fact that we are closing our FTT position. 2/4
— CZ 🔶 Binance (@cz_binance) November 7, 2022
Will FTX users be able to get their crypto back after the crash?
If FTX crashes (as it eventually has), its customers will probably be the most affected. According to the Federal Deposit Insurance Corporation, FTX is not covered by the same protections as traditional banks. This is the main problem. So, it is quite likely that your money is in limbo right now, after the bankruptcy was announced.
During such a case, the court determines the portion to be reimbursed to customers, the reimbursement time, and the order of priority for the reimbursement (another big problem since foot users are usually last). Courts often tell clients when they will be paid and how much of their deposit will be returned to them (spoiler alert, it won’t be all).
How the FTX vs. Binance Showdown Affects the Cryptocurrency Industry
If the acquisition had been carried outwould have led to the merger of the largest centralized exchanges in the cryptocurrency industry.
As of November 9, 2022, Binance had around $49 billion in 24-hour trading volumes and FTX around $4 billion, roughly a quarter of the overall market’s trading volume.
This problem has generated a great shock in the cryptocurrency market and has evaporated the confidence in them. Due to events, the Bitcointhe top cryptocurrency, it plunged more than 10% to lows not seen since November 2020.
Knowing this, centralized exchanges will be hit the hardest, especially triggering concerns about the market dominance of a few entities as opposed to the foundation on which cryptocurrencies are built.
After this type of falls in exchanges, actions such as fundraising, the sale of shares and the formation of joint ventures are contemplated. in order not to fall into the most absolute bankruptcy.
FTX is known to have contacted other companies to form joint ventures, however, to little avail. The insolvency decision means that FTX, Alameda Research and some 130 subsidiaries of the group they will take advantage of bankruptcy legislation to try to get the most out of the assets available to them.
The collapse of one of the main platforms in the sector leaves the funds of around a million users up in the air.
With all this on the table, Binance will now have greater control in the world of exchanges and cryptocurrencies such as Bitcoin, and his figure (Zhao’s) will be more relevant when seeing the chaos that his movement has generated.