As per the latest news, cryptocurrencies have suffered this year as investors pulled out from risky assets due to rising interest rates. On Tuesday, crypto giant Binance signed a non-building agreement to purchase rival FTX’s non-United States Unit.
The two big crypto giants, Binance founder Changpeng Zhau and FTX founder Sam Bankman Frieds were the part of the deal. According to Zhau, Sam asked ‘for our help’ after a significant liquidity crunch’. The biggest cryptocurrency exchange in the world, Binance, will perform due diligence in the upcoming days. As the next step toward purchasing FTX.com. Moreover, Zhau claimed Binance decided after the three-year-old FTX.com approached the crypto titan for help. To protect the users, we signed a non-building agreement to acquire FTX fully.
In his tweet, he also said we would make a comprehensive agreement in the coming days. “Binance can withdraw from the contract at any time.” In reply, Bankman SBF stated, The important thing is that customers are protected. Binance was the first to sponsor FTX, but as the younger firm grew in popularity, the relationship between the two began to deteriorate. As Binance was planning to acquire FTX for several months, both parties threw harsh comments at each other.
At last, Zhau announced that Binance was selling its holdings of FTT. Which it had received as part of an exit from the firm last year. Later, Zhau confirmed that the company was selling off its FTT assets as “post-exit risk management”. This is because of the rumors spreading about Alameda Research’s concerning financial health. Alameda and Bankman-Fried had previously dismissed similar concerns.
Not only this, but Bankman Fried also created Alameda, a prop trading and market-making firm. The firm at least possesses some exposure to FTT. According to Binance trading perspective, the FTT token slid to as low as $14.32 from $25.47 earlier on Tuesday as investors lost their faith. A famous research company Berstein proposed that FTX shut down Alameda due to the anticipated hazards.
So just to be clear… Binance's CEO raises doubts over the financial health of Alameda/FTX, thus causing investor panic around FTX leading a ton of investors to move their funds out, only to then… buy the company outright??
— Ryan Browne (@Ryan_Browne_) November 8, 2022
Binance is a crypto giant, but at the same time, FTX should address its connection to Alameda. However, FTX is unable to maintain its relationship with Alameda. Therefore, FTX needs to ring-fence itself completely and potentially shut down the Alameda prop trading businesses. Alameda would face more downside if the decision will have worst impact on it, stated by Bernstein analyst in the note.
To retain customers’ trust, Bankman Fried, in his tweet, said that CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem and creating a more accessible economic world.
FTX is working on clearing the withdrawal blog; this will clear out liquidity crunches, whereas we will try to cover by 1:1. That is the main reason we asked Binance to come in. He stated that settling might take some time, and we apologize. Binance is the most powerful crypto exchange, worth more than $300 billion. Therefore, customers do not need to worry about their assets and investments.