Binance is pulling rank in the role of crypto consolidator in chief amid public tensions with rival FTX.
“This afternoon, FTX asked for our help. There is a significant liquidity crunch,” Binance CEO CZ tweeted on Tuesday. “To protect users, we signed a non-binding [letter of intent], intending to fully acquire http://FTX.com and help cover the liquidity crunch. We will be conducting a full [due dilligence] in the coming days.”
A liquidity crunch at FTX — which had been buying up trouble crypto platforms in 2022 — hints the potential selling of crypto to shore up finances.
“Things have come full circle, and http://FTX.com’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for http://FTX.com (pending [due dilligence] etc.),” SBF Founder and CEO Sam Bankman-Fried (SBF) tweeted.
Shares of Coinbase and Robinhood, both of which opened lower amid the tensions between two of the largest crypto trading platforms, rose on the news. (SBF holds a 7.6% stake in Robinhood.)
Bitcoin also rose after being under pressure.
Shares of Riot, one of the largest Bitcoin miners in America, also popped on the news.
The “strategic transaction” follows days of turbulence for FTX and its sibling trading firm, Alameda Research — both founded and majority-owned by Bankman-Fried — with FTX’s token tumbling 34% since Nov. 1.
“This is a highly dynamic situation, and we are assessing the situation in real time. Binance has the discretion to pull out from the deal at any time,” CZ added. “We expect FTT to be highly volatile in the coming days as things develop.”
SBF also stated: “Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in. It may take a bit to settle etc. — we apologize for that.”
So far 2022, total crypto volumes worldwide across exchanges have fallen by 21% to $86 trillion, according to crypto indexing platform Nomics.
In that period, Binance accounted for 21.7% of total global crypto trading volume while FTX holds a 3.96% share. The total crypto market capitalization, meanwhile, has fallen by 53% from $2.18 trillion to $1 trillion, according to Coinmarketcap.
A combination of Binance and FTX — the top and third largest crypto trading platforms by volume, respectively — would create a behemoth in the crypto trading community.
How the public spat started
The public tensions between CZ and SBF arose surrounding FTT, the token issued by crypto exchange FTX.
Since November 1, the market capitalization of FTT has dropped by 37% from $3.48 billion to $2.18 billion, according to Yahoo Finance charts as of publication.
The bulk of selling took place after Zhao tweeted on Sunday that Binance planned to liquidate all its holdings of FTT over the next several months based on “recent revelations.”
Zhao later cited a Coindesk report from last week, which found based off documents seen by Coindesk, Alameda Research, the major crypto trading firm and sister company of FTX, held at least $3.6 billion in “unlocked FTT” tokens at the end of Q2.
Between Sunday and Tuesday morning, investor panic fueled selling in FTX’s exchange token, which has fallen by 26.8% from $23.6 to $17.2 and contributed to the sell off of crypto’s total marketcap by 7% from $1.05 trillion to $979 billion for the same period according to CoinMarketCap.
“It was totally rational that people questioned [FTX and Alameda’s] assets,” Ki Young Ju, CEO of CryptoQuant, a South Korean crypto analytics platform that tracks crypto investment flows, told Yahoo Finance.
Based on data collected by Ju’s team, FTX’s net crypto assets plummeted by 83% over the past two days.
CZ and SBF traded accusations over Twitter, though now they seem to have made an agreement in an attempt to palacate the entire crypto ecosystem.
“I know that there have been rumors in media of conflict between our two exchanges, however Binance has shown time and again that they are committed to a more decentralized global economy while working to improve industry relations with regulators,” SBF added in his announcement.
“We are in the best of hands,” he added.
This post has been update with new details.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on Twitter at @DsHollers.
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