The largest cryptocurrency exchange in the world, Binance, has bailed out one of its biggest competitors, FTX, in a move that is being hailed as a huge upheaval in the cryptocurrency industry. A wave of withdrawals has decimated FTX, and Changpeng Zhao, CEO of Binance, is taking action to prevent a collapse of the cryptocurrency market that might have been brought on by his decisions.
After reaching a day high of $20,663 on Tuesday, the price of Bitcoin dropped by about 10% to a 52-week low of $17,484, before rising to $18,259 following the announcement of the deal. In one day of trading, FTT fell from $21.04 to $4.16 by roughly 75%. A tweet from cryptocurrency analysis company Nansen, which calculated that more than $500 million had left the platform during the previous 24 hours, made clear the panic in the markets. Estimates put the total outflow over the previous 24 hours at $1.2 billion.
On Sunday earlier this week, Zhao stated that owing to undisclosed “recent findings,” Binance would sell its holdings of FTX’s proprietary cryptocurrency, FTT. It caused a surge of withdrawals from FTX, which culminated on Tuesday in what some experts have referred to as a “forced sale.”
Due to the non-binding nature of the arrangement, Binance would be free to leave at any time. Although the sum of the transaction was not made public, FTX was once worth $32 billion. Reuters statistics show that Binance, which has more than 120 million users, controls the $1 trillion cryptocurrency market.
Two of the most well-known figures in the crypto sector are Zhao and Bankman-Fried, also known by their initials CZ and SBF.
On Tuesday, Zhao tweeted: “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 FTX.com and help cover the liquidity crunch.”
Sam Bankman-Fried, the dashing founder and CEO of FTX, congratulated Binance in a series of tweets, which were the only comments he had to provide. “Things have come full circle… we have come to an agreement on a strategic transaction with Binance for FTX.com (pending DD etc.). “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.”
