Binance, a cryptocurrency exchange, announced that it intends to acquire FTX Trading, a competitor, in what appears to be a rescue of FTX.
The merger was announced on Twitter by the heads of the two exchanges, Changpeng Zhao of Binance and Samuel Bankman-Fried of FTX, but no specifics were provided. According to Zhao’s tweets, the deal was still undergoing due diligence.
This afternoon, FTX requested our assistance. A serious liquidity constraint exists, according to Zhao’s tweets. We signed a non-binding (letter of intent) with the intention of fully acquiring FTX and aiding in the liquidity crunch “to protect users.”
With the transaction, Binance, which already has the largest daily volume of any cryptocurrency exchange, would become even more of a market leader. As of this week, FTX was the third-largest exchange.
As the value of cryptocurrencies like bitcoin and ethereum has fallen, FTX is the most recent cryptocurrency startup this year to experience financial difficulty. Due to worries over FTX’s lack of liquidity, Binance announced this past weekend that it intended to sell a piece of its own cryptocurrency, known as FTT.
The vulnerability of FTX to FTT was a major source of worry. FTT tokens were substantially exposed to by Bankman-trading Fried’s firm Alameda Research, and as of this weekend, the majority of those tokens were not trading. Investors in cryptocurrencies reported having issues with FTX withdrawals on Tuesday morning. FTT’s value fell overnight before stabilizing after the announcement of the purchase.
Following the announcement of the agreement, other significant cryptocurrencies also increased, with Bitcoin increasing by 5%.
Earlier this year, Bankman-Fried, often known by his initials SBF, was hailed as the crypto industry’s savior after promising to buy specific cryptoassets to support the balance sheets of other faltering crypto firms. Companies like Voyager Digital, which folded after holding a stake in the unsuccessful stablecoin Terra, were among them.
Additionally, Bankman-Fried invested in Robinhood when the company’s shares fell, it lost money and its revenue fell.
