Binance averted the ongoing market threat of crackdown after FTX deal

    TheMorningCrypto Desk
    TheMorningCrypto Desk

    Updated on January 09, 2023 12:50 PM

    Published on November 09, 2022 03:15 PM

    Following a liquidity crisis, Binance has signed a non-binding letter of intent to purchase its rival FTX for an unknown price.

    Binance averted the ongoing market threat of crackdown after FTX deal
    Source: twitter

    The Issue creator solved the issue

    The crypto industry received massive news on Tuesday. Binance, the world's largest cryptocurrency exchange, announced plans to purchase FTX, citing a "severe liquidity crunch" at its competitor.

    A huge setback for the crypto market has been averted after Cz Binance and FTX Ceo Sam Bankman reached a mutual agreement to stop the feud and restrict the expected crypto meltdown crisis. Binance acquired FTX to solve the prolonged liquidity issue.

    Binance CEO Changpeng Zhao said a day after negotiating a rescue of the exchange's rival that the near-collapse of FTX had "severely shook" faith in the crypto economy and would prompt stricter regulatory scrutiny.

    The acquisition was disclosed in a series of Twitter tweets, but the financial parameters were not declared. We know that Binance was the first investor in FTX and will now be the final, while FTX's US business, known as FTX US, is not included in the transaction. According to executives from both organizations, a comprehensive due diligence procedure would begin over the following several days.

    Regulators will scrutinize trades

    In an internal memo, Zhao stated that the bailout, which solidified Binance's status as the world's largest crypto trading platform, was not a "victory."

    "Regulators will scrutinize trades even more closely." "Licenses will be more difficult to get throughout the world," Zhao wrote to colleagues early Wednesday.

    The letter also detailed the rapidity with which he and his counterpart Sam Bankman-Fried decided to avert the catastrophic collapse of FTX, which had been valued at $32 billion earlier this year. Binance did not respond to a request for comment on the internal communication.

    The issue with FTX

    The issues at FTX worsened after Zhao announced over the weekend that his business planned to sell more than $500 million in FTX's digital currency, exceeding its usual daily trading total.

    "It was less than 24 hrs ago that SBF called me. And before that, I had very little knowledge of the internal state of things at FTX. I could do some mental calculations with our revenues to guess theirs, but it would never be very accurate," Cz Zhao stated.

    After a discussion with Bankman-Fried on Tuesday, Zhao claimed he asked Binance to halt sales of FTT, an FTX coin.

    Zhao claimed that due diligence on the FTX transaction was underway and that he may yet walk away from the arrangement. In a tweet earlier on Wednesday, he hinted at his thoughts on what went wrong at FTX.

    The Binance CEO also said purchasing FTX, creating the world's largest crypto exchange, would paint a bullseye on the company's back.