Binance Agrees To Buy Competing Crypto Exchange FTX
Another day, another meltdown in the world of cryptocurrency. This time around, a multi-billion company seems to have reached the brink of collapse in what feels like the blink of an eye. It's a real rollercoaster of a story, and unsurprisingly, the crypto world at large is responding to it already — with strange highs and deep lows. Here's what's happening to FTX, the crypto exchange in question.
FTX is a major cryptocurrency exchange, and it also has its own crypto token called FTT. At the very beginning of FTX, Binance, another exchange, invested in it early on. FTX had a wonderful start, growing in popularity quickly and maintaining that success over time. At the start of 2022, FTX had a valuation of $32 billion. Interestingly enough, after being an early investor, Binance became FTX's biggest rival, with other exchanges such as Coinbase also competing against them.
At some point, Binance sold its stake in FTX, but instead, it now owned $2 billion worth of FTX's signature token FTT. That's a massive amount of crypto, and FTT was never one of the most popular tokens. It had nothing on Bitcoin, Ethereum, and the likes. Why is this important? Because that puts anyone who owns FTT in a very precarious position — a smaller token where one company holds such a large chunk of it calls for trouble. Well, it seems that trouble has now arrived.
Things have come full circle
According to The Wall Street Journal, at the heart of FTX's problems lies a conflict between the two founders of each respective company. Sam Bankman-Fried, the founder of FTX, and Changpeng "CZ" Zhao, the founder of Binance, have allegedly been involved in some kind of drama. The two haven't commented on the matter, but rumors such as this Twitter thread suggest that something led Zhao to publicly announce that he will be getting rid of Binance's entire $2 billion worth of FTT. Zhao also expressed doubt in the stability of FTT, comparing the choice to liquidate to LUNA, a token that completely collapsed just a few months prior.
Unsurprisingly, when the crypto world heard about Binance's choice to get rid of FTT, many rushed to sell it before value was completely wrecked. The price of FTT steadily dropped over the last few days. According to Coingecko, while FTT had a steady price up until Nov. 8, it fell off a cliff during the course of the day, dropping from around $21 to $5. The crypto exchange had to pause withdrawals for a while as rumors about the company's solvency, or rather, lack thereof, grew even louder.
This brings the FTX exchange full circle. After Bankman-Fried reached out to Zhao, the two crypto leaders came to a non-binding agreement, seemingly putting their differences aside. Binance is, in all likelihood, buying out FTX. After being its first investor, it might also be its last, provided that the deal does go through as reported by both Bankman-Fried and Zhao. In the meantime, Zhao says: "We expect FTT to be highly volatile in the coming days as things develop."