Binance Announces FTX Buyout And The Market Recovers

Is Binance really doing what it claims? The world’s biggest cryptocurrency exchange by trading volume will likely buy one of its biggest competitors. This news helped to calm the market. What’s next, though? What happens if Binance goes through with the takeover? What is the final deal? And what does this story says about FTX’s business model? Did they succeed by fractional-reserving?

Let’s analyze the official but not abundant information out there and try to reach our own conclusions.

Sam Bankman-Fried Bends the Knee

The mind behind FTX Research and Alameda Research spoke after a long morning of silence. Sam Bankman Fried gave a twitter thread that will last forever. “we have come to an agreement on a strategic transaction with Binance for,” he tweeted. Then, he announced that “our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1.” Wasn’t that supposed to be the case from the beginning, though? 

Bankman Fried declared then the winner. “A *huge* thank you to CZ, Binance, and all of our supporters. This is a user-centric development that benefits the entire industry,” he tweeted about his new boss. “Binance has shown time and again that they are committed to a more decentralized global economy while working to improve industry relations with regulators. We are in the best of hands.”

But is the agreement final? According to River’s CEO Alexander Leishman, “The DD on this deal is going to take forever. Bankruptcy still on the table if Binance decides they don’t want to touch it after digging deeper.”

BNBUSD price chart - TradingView

BNB price chart in FTX | Source: BNB/USD on

Binance CEO Announces Their Win

CZ claimed that he knew exactly what he did all along. Today, CZ is able to show his true colors after disengaging himself from war and stating that Binance was focusing on building. “This afternoon, FTX asked for our help. It is experiencing a severe liquidity crisis. To protect users, we signed a non-binding LOI, intending to fully acquire and help cover the liquidity crunch,” he humbly tweeted. 

However, CZ is admitting to a liquidity crunch that shouldn’t be there. And then, he clarifies that the deal isn’t done yet. “There is a lot to cover and will take some time. It is an extremely dynamic situation and we are constantly monitoring it. Binance has the discretion to pull out from the deal at any time.”

We can only analyze the data that we do have. DeFinace Capital’s Arthur Ox tweeted, “Given how little time it took to close this deal. It’s likely Binance acquire FTX for nominal/negligible amount and assume all the liabilities of FTX.” And then, he gave advice, “if I am previous round investor of FTX, I will probably start engaging litigation lawyer now.”

The Future of Binance and FTX

Analysts are enjoying a field day over this story.  Dylan LeClair, who’s been covering the ins and outs from day one, recently tweeted that the resolution “confirms that FTX is insolvent without a bailout from Binance” and that “Alameda was speculating with user funds.” Those are hard accusations, but he’s got some data to back them up. 

Questioning the liquidity crunch, LeClair asks, “was your “proprietary trading desk” directionally trading using user funds. We could all see the movements flooding back from Alameda wallets on-chain yesterday as reserves got depleted.” Taking it to the next level, economist Tuur Demeester is concerned with the implications, “If Binance buys FTX and hence takes over the claims of its depositors, it seems likely that Binance then would also become (or remain) a fractional reserve operation.”

Candice Seplow's Featured Photo on Unsplash | Charts by TradingView

Get more Crypto News at CFX Magazine