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The Binance- FTX saga: What just happened in the crypto world?

The Binance- FTX saga: What just happened in the crypto world?

The collapse of FTX has jolted 50 lakh customers across the world who used the exchange to trade and invest in crypto. The FTT crypto, which traded at $80 at its all-time high has wiped out billions of dollars' worth of wealth. After LUNA, Celsius, Voyager, the collapse of the FTX empire has become a crude reminder of the volatility in the crypto markets.

the collapse of the FTX empire has become a crude reminder of the volatility in the crypto markets. the collapse of the FTX empire has become a crude reminder of the volatility in the crypto markets.

“Uh, he is allowed to go to DC, right”

A tweet, which has now been deleted by Samuel Bankman-Fried (SBF), the founder of the world’s erstwhile second largest crypto exchange FTX, about Changpeng Zhao (CZ), the founder of the world’s largest crypto exchange Binance, seems to have triggered the collapse of the exchange and its allied companies.

When Zhao visited the US capital to meet with policy makers on October 30, Fried questioned whether the former is even allowed in Washington DC because of the country’s ban on Binance’s main platform. This was the beginning of the biggest smackdown in the crypto world.

Three days later, on November 2nd, crypto news platform CoinDesk reported about an irregularity in the books of Alameda Research, a sister company of FTX, founded by Fried in 2017. The report claimed that Alameda’s financials were largely made up of FTT, the cryptocurrency minted by FTX exchange.

Cory Klippsten, CEO of investment platform Swan Bitcoin said in the report, “It’s fascinating to see that the majority of the net equity in the Alameda business is actually FTX’s own centrally controlled and printed-out-of-thin-air token.”

Moreover, it was also reported that Alameda Research used FTT, a cryptocurrency that was being minted by its sister company, as collateral to take up loans.

Many in the crypto world claim that Binance leaked this document to CoinDesk to bring FTX in place. Binance has denied this claim publicly.

On November 6, Zhao tweeted that Binance would liquidate their FTT positions. It is worth noting that Binance was one of the first investors in FTX exchange and they exited the company last year in return of $2.1 billion worth of FTT and BUSD.

As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4

— CZ 🔶 Binance (@cz_binance) November 6, 2022

This development caused a widespread panic situation in the crypto markets and holders started selling their FTT holdings. The cryptocurrency was trading around $25.42, minutes before Zhao’s tweet. The crypto crashed $2.06 during the early hours of Thursday.

This panic also spread across to other altcoins and Bitcoin. The crypto market crashed roughly 20 per cent and fell below the $1 trillion levels. Bitcoin, Ethereum, Solana, Dogecoin and other crypto tokens witnessed double digit downtrend. Around $200 billion worth of wealth wiped out from the markets.

Amid mass sell-offs and dropping liquidity, FTX reached out to Binance for help. Fried wrote a long thread on Twitter appreciating Zhao and announced that the latter’s exchange would bail FTX out of this crisis.

Zhao also made the development official by tweeting that Binance had signed a non-binding Letter of Intent to acquire FTX and bail it out of this crisis. 

The markets had just started to stabilse after the big announcement that Binance took a u-turn on its stand. The exchange took to Twitter to say that after due diligence, they have decided not to acquire FTX because of "mishandled customer funds and alleged US agency investigations" 

The collapse of FTX has jolted 50 lakh customers across the world who used the exchange to trade and invest in crypto. The FTT crypto, which traded at $80 at its all-time high has wiped out billions of dollars' worth of wealth. After LUNA, Celsius, Voyager, `

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Published on: Nov 10, 2022, 4:29 PM IST
Posted by: aakanksha chaturvedi, Nov 10, 2022, 4:12 PM IST