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Binance plans to buy rival FTX in bailout as crypto market crumbles
Tuesday saw a sharp decline in cryptocurrency prices, and FTX's native token experienced a 15% decline as investors were alarmed by rumors that FTX's finances were under pressure.
To aid with a "liquidity bottleneck" at the rival exchange, cryptocurrency giant Binance reached a non-binding deal on Tuesday to purchase FTX's non-U.S. unit. This surprising bailout has renewed investor fears about cryptocurrencies.
Sam Bankman-Fried, the CEO of FTX, and Changpeng Zhao, the CEO of Binance, reached an agreement despite their high-profile rivalry when withdrawals totaling $6 billion were made from FTX in the 72 hours leading up to Tuesday morning.
Zhao, who had tweeted on Sunday that Binance would liquidate its holdings of the rival's token owing to vague "recent developments," played a part in the pressure put on FTX.
Dan Raju, CEO of financial services company Tradier, a brokerage, said: "It's frightening to think that FTX, one of the top cryptocurrency exchanges in the world, got bitten by liquidity worries and Binance, their greatest competition, is coming to their rescue."
The 30-year-old billionaire Bankman-spectacular Fried's turnaround in fortunes is the third emergency cryptocurrency rescue this year as investors fled riskier assets due to increasing interest rates. From its peak, the cryptocurrency market has decreased by around two-thirds, reaching $1.07 trillion.
On hearing of the agreement on Tuesday, major cryptocurrencies initially rose, but those gains were swiftly lost.
The price of FTX token, which grants owners discounts on FTX trading fees, was recently $5.33 after falling by more than three-quarters. The largest digital token, bitcoin, was down 11%.
After FTX's shares dropped more than 10%, Coinbase Global Inc. reassured investors in a blog post that it had no exposure to the stock.
Forbes estimates Bankman-net Fried's worth at $16.6 billion; he has claimed to have billions on hand to support faltering digital asset firms. He disclosed a 7.6% ownership holding in Robinhood Markets Inc. in May, taking advantage of the trading app's declining share price.
According to those familiar with the situation, Tuesday's developments left FTX investors rushing to understand what the arrangement with Binance implies for their investment in FTX.
Bankman-Fried attempted to reassure FTX investors in a note to investors shared on Twitter and verified by a source with knowledge of the situation late on Tuesday. In the note, Bankman-Fried stated that "protecting shareholders is our highest priority," but added that specifics of the deal were "still being worked out." A request for comment from FTX was not immediately complied with.
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