Binance, the world’s largest crypto exchange is on the verge of acquiring FTX potentially saving the company and the crypto industry from a collapse on levels we have not seen. FTX has been experiencing challenges in the market over the last year. A lot of economic factors such as a looming recession, and declining demand for cryptocurrency along with others have led to this.
Due to the increasing uncertainty within the crypto market customers have been on a “bank run” over the last week and increasing over the last few days. As a result, customers have been withdrawing money from FTX and it has led the company into a liquidity crisis.
FTX founded by Sam Brank-Fried has been a “poster boy” for the crypto industry, it has been regarded as a well-run company backed by savvy investors. This puts a lot of trust in other investors to join the crypto market. It seems that this was all a front and FTX had a lot of skeletons in the closet which have slowly begun to unravel as the market slows and everyone starts to pull their money.
Many of its customers, who use FTX to buy and store their digital currencies, rushed to take their money out. On Monday night, the crypto research firm Nansen reported that more than half a billion dollars had flowed off the platform over the previous 24 hours.
At one point on Tuesday, FTX stopped processing withdrawals altogether, according to the Block, a crypto research firm. The exchange appeared to have entered a “liquidity crunch,” meaning it lacked the funds to fulfill the demand for withdrawals.
If the deal goes through, it will unite two of the largest crypto companies and cement the status of Binance’s founder, Changpeng Zhao, as one of the most powerful figures shaping the future of the loosely regulated crypto industry. It is reported that the deal stands at $32 billion.
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
In an activity to save face, Sam Bank-Freid apologized for not being upfront with the recent incidents with the company. He apologized for not being communicative recently and said the company experienced roughly $6 billion of net withdrawals over the past 72 hours, compared with the relative number of inflows and outflows on a typical day.
Let’s see how this deal develops over time, it looks like it’s already in the works and the parties are serious. It goes to show us how volatile the crypto industry is, FTX collapse would be akin to Goldman Sachs collapsing on Wall Street. This now puts Changpeng Zhao as the most powerful man in the crypto industry at the moment.
