Is FTX Going to Collapse?
Within one day, FTT, the native token of FTX, collapsed from above $19 to less than $4. FTX is facing insolvency when its main rival Binance steps in and offers to buy it.
What happened and what role did Binance play in the entire game?
Here is the timeline of how things were developing.
2019 - Binance invests in FTX and takes a long-term position in FTT.
2021 - Binance exits the FTX equity. The platform receives over $2bln in USD and FTT. Even though Binance could just sell FTT, it holds the tokens.
Source: Twitter
November 2, 2022 - CoinDesk publishes an article where it states that the balance sheet of Alameda Research, another company founded by Sam Bankman Fried, the FTX CEO, has the majority of its assets in FTT – a token that is freely issued by FTX. It means that both companies are highly dependent on the FTT price.
November 6, 2022 – Chagnpeng Zhao tweets about his intent to offload all the FTT tokens that Binance was holding. He needs it to protect his own company in case FTX and Alameda face any issues.
Source: Twitter
The Alameda CEO offers to buy off all FTT holdings of Binance for $22 but CZ refuses claiming he is for a free market.
Source: Twitter
Even though the CZ tweet immediately sent FTT to $22, it was still possible for Sam to save the situation. And at that time, the entire value of Binance’s FTT was about $500 mln, the sum that was still not critical to FTX if CZ accepted the buy out. But he declined. It caused the FTT freefall.
Meanwhile, Twitter performs its task perfectly – the news is getting spread. New details are added. FTT continues falling.
Source: https://coinmarketcap.com/currencies/ftx-token/
Whales start removing funds from FTX. Within 24 hours only, millions of dollars were moved from the platform to other protocols.
Source: Twitter
Users joined the whales, and the process became irreversible. The platform started suffering from liquidity issues. First, it imposed limitations on withdrawals, and later, it froze withdrawals completely.
November 8, 2022 – FTX asks Binance for help. The Binance CEO signs a letter of intent to buy FTX.
Will the Acquisition Happen?
Nobody knows for now. First, thorough due diligence will be performed to see whether FTX is not hiding anything else.
Source: Twitter
Some people believe that CZ planned everything in advance and now, is celebrating the victory over one of its main competitors. The acquisition is beneficial for CZ because it will expand his presence in the US market.
Others claim that the due diligence will take some months, and after that, CZ will refuse to buy FTX. All this story is made up to let FTX recover and return to the market.
Whatever scenario works out, one thing is clear: Binance won’t allow FTT to plummet to 0. Why? It still holds $ millions worth of FTT in its wallets, as Etherscan tells us.
Another thing is clear, too. While CZ could communicate with Sam to announce tokens sell off, and thus, facilitate the situation for FTX, he didn’t do so. Instead, he announced it on Twitter.
But on the other hand, it was not his fault that Alameda was backed mostly by tokens issued by its sister company. Also it was not him who made the public announcements about the financial instability in the company.
It is also unclear what gaps will be discovered during the due diligence performed by Binance. But for sure, Binance won’t let FTX just vanish. It would impact the market too much, and Binance would suffer, too.
Stay tuned for further updates, crypto guides, and market insights from LetsExchange. You can also follow us on Twitter, Facebook, Reddit, Instagram, LinkedIn, Medium, Quora, Telegram, Steemit, and Bitcointalk for first-hand information from our team.