The deal between the Chief Executive Officer of Binance Changpeng Zhao and Sam Bankman-Fried, CEO of FTX came as uncertainties on FTX’s economic security expanded into $6 billion of withdrawals around 72 hours before Tuesday
Binance, the largest crypto exchange in the world in terms of daily trading signed a nonbinding agreement to buy FTX’s non-U.S. unit in order to cover a ‘liquidity crunch’ at the contending exchange, in a bailout that raised worries among investors about cryptocurrencies. The deal between the Chief Executive Officer of Binance Changpeng Zhao and Sam Bankman-Fried, CEO of FTX came as uncertainties on FTX’s economic security expanded into $6 billion of withdrawals around 72 hours before Tuesday.
Changpeng Zhao on Sunday in a statement announced that Binance had received around $2.1 billion dollars in cash as part of its exit from FTX equity the previous year and the crypto exchange is deciding to liquidate any remaining FTT in its books due to ‘recent revelations’. Binance decision to buy FTX is one of the most important bailouts in crypto markets as many investors pulled out from riskier assets when there was an increase in the rise of interest rates. The cryptocurrency markets had fallen around two-thirds reaching $1.07 trillion.
Several cryptocurrencies rose after the news of the deal between the crypto exchanges came out, but the currencies faced an unstable floor on Tuesday. Bitcoin, which is the biggest cryptocurrency by market value went down 1% at $18,400 after having a 10% drop on Tuesday, marking the worst day since the month of August. FTT collapsed by 72% and went down further by 22% making it a two-year low of $4.25 on Wednesday. The details of the deal are still being decided and it is unclear on how the deal between the two crypto exchanges will take place.
FTX stated that protecting the shareholders would be their highest priority. The token used on Binance, the Binance coin with a market value of $52 billion, was down around 6% since Tuesday reaching $317.11. The U.S processes of both the crypto exchanges won’t be a part of the deal as confirmed by Bankman-Fried. A warning of wider contagion came from the board advisor at Raffles Family Office and part of the board of Singapore association ACCESS, Zann Kwan stated that more things will unfold. Bankman-Fried stated that his teams were working on clearing up the withdrawal backlog even though there is ambiguity in the market on the bailout’s position and the intensity of problems kept the investors uneasy.
The U.S antitrust enforcers could insist on questioning the merger and Binance is currently under investigation by the justice department for potential violations of money-laundering rules, according to the reports by Reuters. Binance stated that the crypto exchange is focusing on driving higher industry standards and is aiming to improve the firms’ ability to distinguish unlawful crypto activity. The tensions between both CEOs emerged over a leaked report by CoinDesk on a leaked balance sheet from Alameda Research which is a trading firm founded by Bankman-Fried. The pace of withdrawals happening in FTX was increasing, creating tens of millions of dollars in net outflows.
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