The FTX crypto exchange has liquidity problems. Binance takes over

09/11/2022, 16:3409/11/2022, 17:42

Patrick Toggweiler
Patrick Toggweiler

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The second largest crypto exchange FTX has liquidity problems. FTX CEO Sam Bankman-Fried made the announcement via Twitter yesterday.

Thanks to the support of the largest crypto exchange Binance, users’ investments are not at risk. Binance has signed a (non-binding) letter of intent to fully acquire FTX.com.

The market reacted with panic. Bitcoin has fallen from over $21,000 to just under $17,300 in recent days (as of November 9, 2022, 12:10 p.m.). Many other coins like Ether, Ripple, but mainly FTX darling Solana crashed even worse.

The drama has been reported in recent days. Starring Canadian Changpeng “CZ” Zhao, founder and CEO of the currently largest crypto exchange Binance, and – as the beaten dog – Sam “SBF” Bankman-Fried, founder and CEO of up-and-coming and, depending on the metric, second or third the largest crypto exchange FTX.

Sam Bankman-Fried explains his donations to the Democratic Party for the Midterms.Video: YouTube/NBC News

The quirky SBF enjoyed an excellent reputation in the crypto scene just a few weeks ago. His goofy TV appearances in shorts, t-shirts and curly hair helped him achieve cult status. Despite being worth billions, he drives a Toyota Corolla, lives a vegan lifestyle and represents a philosophy of effective altruism. In other words, he wants to help as many people as possible as quickly as possible. He is the antithesis personified of crypto personalities who like to trumpet their financial success with status symbols.

SBF founded the crypto fund Alameda Research in 2017 and the crypto derivatives business FTX in 2019. It grew explosively in a very short time thanks to interesting business opportunities. Just two years after its establishment, FTX had a million users and a daily trading volume of 10 billion dollars. FTX bought the naming rights to the Miami Heat stadium for more than 100 million. Partnerships were formed with basketball uber Steph Curry and football star Tom Brady.

Changpeng «CZ» Zhao: Humble as smart.

Changpeng «CZ» Zhao: Humble as smart.Image: keystone

Enter CZ. CZ doesn’t even wear a simple mammon and likes to present herself down-to-earth with a hooded sweatshirt and a monk’s short haircut. But CZ is a smart tactician. In the fast-moving crypto scene, where lines of light figures are knocked off their pedestals, CZ seems to survive all the storms unscathed. Also when FTX attacks Binance’s throne. Because CZ soon recognized the potential of its opponents – and invested in FTX.

Meanwhile, FTX is thriving. As a result of the hype surrounding the emerging crypto exchange, the price of the internal token (FTT) also increased from one to $80. Only a fraction of it is on the market – the rest remains owned by FTX and Alameda. And now they store the valuable token as a guarantee during transactions.

When CZ sells its FTX shares in 2021, it will get 2 billion for it – paid in FTT and BUSD. It is not clear whether CZ insisted on this form of payment or whether FTX could not pay him in another way. In any case, it brought CZ not only a nice win, but also a means to bankrupt FTX. Because: Demand for FTT is so low that Binance has the power to flood the market and send the price plummeting. This would reduce the market leader’s own profits, but would put the incoming competitor in big trouble. Rumor has it that he took too many risks and was covered by FTT.

But CZ has a problem: Sam Bankman-Fried is the darling of the scene. Such an open confrontation could prove to be a shot in the foot. The sacred cow must not (yet) be slaughtered.

The clock is ticking fast in the crypto scene – and the wind can suddenly turn. Sam Bankman-Fried found this out too. The enormous growth of FTX has not gone unnoticed by the authorities. FTX is suddenly in legal trouble in Texas. In addition, the SBF has been shown to support a bill that is extremely unpopular on the scene.

SBF is featured in a well-received podcast. He becomes entangled in opposites, the former high-flyer’s wings are clipped vividly by the brilliant speaker Erik Voorhees. The mood changes.

Now is the time. On Twitter, CZ defamed SBF. He was plotting against him with the regulatory authorities. With the caveat that he only wants to create transparency, he announces that Binance will sell all of its FTT tokens.

The news triggers what it should: in anticipation of falling prices, FTT owners try to save what they can and panic. The price is dropping fast. From less than $20 to $3.15 in one day. Frightened customers, burnt children of recent bankruptcies, withdraw their savings from FTX – the trading platform runs into liquidity problems. It’s going as it should: CZ and Binance are presenting themselves as a golden savior.

The takeover is not yet complete. FTX is not swallowed in one bite. Rather, FTX is incorporated slowly and slowly. Like too much prey from a snake.

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