The deal is the latest emergency rescue in the crypto world this year, as investors pulled out of riskier assets amid rising interest rates.
The deal is the latest emergency rescue in the crypto world this year, as investors pulled out of riskier assets amid rising interest rates.
Crypto giant Binance has signed a non-binding agreement to buy rival FTX’s non-US unit, FTX.com, to help cover a “liquidity crunch” at the cryptocurrency exchange, the companies said in a surprise Tuesday. step, which raised new concerns about the risks. What investors face in the volatile crypto market.
Binance CEO Changpeng Zhao said in a tweet that FTX, run by billionaire Sam Bankman-Fried, “asked for our help” following “a significant liquidity crisis”.
He added that the world’s largest crypto exchange, Binance, will do due diligence in the coming days as to the next step towards the acquisition of FTX.com. In a separate tweet, Mr. Bankman-Fried said the US operations of Binance and FTX are not part of the deal.
“It has been an open secret for some time that FTX and Binance were in existential competition; the only surprise today is that things have come to a conclusion so quickly,” said Joseph Edwards, investment advisor at Securitize Capital. “The move should bring relief to consumers in the short term, but raises questions in the long run.”
The deal is the latest emergency rescue in the crypto world this year, as investors pulled out of riskier assets amid rising interest rates. The cryptocurrency market is down almost two-thirds from its peak of $1.07 trillion.
It also underscores a sudden reversal of fortunes for Mr Bankman-Fried, who had established himself as the savior of the industry by shielding rivals who ran into trouble at the start of the year.
“There continues to be a liquidity crunch in the cryptocurrency market,” said Dan Raju, CEO of financial services provider and brokerage Trader. “It is scary to think that FTX, one of the largest crypto exchanges in the world, was bitten by liquidity concerns, and their biggest rival, Binance, is coming to their rescue. This is due to some strange bedfellows. Will make it for you.”
According to a message to employees sent by Mr Bankman-Fried that was seen by Reuters, FTX had seen withdrawals of nearly $6 billion in the 72 hours before Tuesday morning.
“On an average day, we have tens of millions of dollars of net in/outflow. As of this weekend, things were mostly average until a few days ago,” Mr. Bankman-Fried wrote in a message to employees Tuesday morning. “In the last 72 hours, we have netted approximately $6 billion from FTX.”
Withdrawals on FTX.com are “effectively halted,” he wrote, and will be resolved “in the near future.”
FTX did not immediately respond to a request for comment on the message to employees.
legitimate cause for concern
The deal follows a collapse in crypto exchange FTX’s in-house token, losing a third of its value and pulling down other major digital assets amid financial pressure from FTX.
Binance, which dominates the crypto industry with more than 120 million users, is currently under investigation by the US Department of Justice for possible violations of money-laundering regulations, Reuters reported last week.
A spokesman for the US Commodity Futures Trading Commission said the agency was monitoring the situation.
News of the deal initially sparked the major cryptocurrency, but those gains were quickly wiped out.
The FTX token – which gives holders a discount on FTX trading fees – was last trading down 47% at 11.83.
Bitcoin, the largest digital token, was down 6%.
“If one of the world’s largest centralized exchanges ends up in financial difficulties, people have a valid reason to worry about the security of their digital assets,” said Pascal Gauthier, CEO and president of crypto security firm Ledger. Is.” “It is time for an honest, industry-wide reckoning on the importance of crypto custody.”
Crypto users raised questions about FTX tokenization on Twitter last week, following a report from news website CoinDesk on a leaked balance sheet from Alameda Research, a trading firm founded by Mr. Bankman-Fried that has close ties to FTX. .
On Sunday, Mr. Zhao said his firm would liquidate its holdings of FTX tokens due to unspecified “recent disclosures”.
Mr Bankman-Fried initially said the exchange was “fine” and that concerns were “false rumours”.
In a tweet on Tuesday, he said that his team was working on eliminating the withdrawal backlog: “This will address the liquidity crunch. This is one of the main reasons we asked Binance to come.”
“A *huge* CZ, thanks to Binance,” wrote Mr. Bankman-Fried, referring to the rival CEO, who goes by his initials.