After the sharp fall in the value of the cryptocurrency market at the end of May this year, the exchange FTX helped and saved several companies that were collapsing. This large and well-known exchange suddenly entered into crisis last week and was in dire need of financial assistance.
Binance, the main competitor of FTX, was on the verge of rescuing the exchange, but eventually gave up on its decision and said that, contrary to the initial announcement, it has no desire to acquire FTX. Friday night Tehran time, FTX officially announced bankruptcy and its CEO resigned. The CEO of FTX is someone who many times with Warren Buffettthe famous American billionaire, compared.
This relatively short story clearly shows how the brakes were pulled on one of the biggest exchanges in the crypto industry, under circumstances that few would have believed.
In what field do FTX and Binance operate?
FTX and Binance are major exchanges in the cryptocurrency world that have created a platform for digital currency trading. Data driven institute CoinMarketCap (belonging to Binance) By providing documented information, he has announced that most of the world’s transactions in the field of crypto are carried out on the platform of Binance and FTX.
FTX, one of the largest exchanges in the world, by Sam Benkmanfried It was managed and its headquarters is located in the Bahamas. FTX has spent millions of dollars lobbying US lawmakers to make the rules for the crypto industry less restrictive.
Binance, the world’s largest cryptocurrency exchange, by Changpeng Zhaoknown as C.Z, is managed. Binance, which does not have a headquarters and conducts most of its activities outside the United States, has been repeatedly monitored by American institutions for allegedly circumventing the rules. Binance is one of the first investors of FTX exchange.
Both FTX and Binance have built their businesses on high-risk trading options that are not legal in the US market. These companies are smaller subcategories called Focusing on the US market, Binance.us and FTX.us are separate from the parent company and are structured to comply with US law.
to the writing of New York TimesIn recent years, the American Congress has launched a serious and deep investigation against the crypto industry and companies active in this field. In other parts of the world, including the European Union, similar research has been done focusing on the crypto market.
45-year-old CZ and 30-year-old Sam Benkmanfried have repeatedly publicly criticized the rules that have been put in place for the crypto industry, even citing reasons that the industry should not be targeted by regulatory bodies.
Why did FTX enter the crisis?
FTX exchange has a dedicated token called FTT. Crypto market traders use this token for things like paying transaction fees. Last year, CZ sold his stake in FTX to Benkmanfried, and reports said the FTX CEO gave CZ a portion of the money in the form of FTT tokens.
On November 2, 2022 (November 11, 1401), the news agency CoinDesk published an exclusive report centered on a leaked document. That report showed that Alameda Research, a Risk hedge fund Under the management of Sam Benkmanfried, it has an unusual amount of FTT tokens. FTX and Alameda Research were supposed to be separate companies on the surface, but the CoinDesk report showed that the two companies have close financial ties.
Binance said in a statement on November 6, 2022 (Aban 15, 1401) that it is selling all of its FTT tokens “based on recent disclosures”. In response, the value of the FTT token plummeted and traders began pulling their capital out of the FTX exchange, fearing that the exchange would suffer the fate of several bankrupt companies in the crypto industry.
FTX customers registered $6 billion in withdrawal requests within three days, and the exchange struggled to process the requests. FTX appeared to be in a liquidity crunch, meaning it didn’t have enough money to pay users.
How did Binance fit itself into the equation?
Last Tuesday, Binance said in a statement that it had reached an agreement with the managers of FTX to acquire this exchange and turn it into its subsidiary. CZ clearly said in Binance’s statement: “Binance reserves the right to withdraw from the transaction at any time.”
Sam Benkmanfried said in a statement at the same time that the agreement in question protects customers and allows FTX to continue processing withdrawal requests. Benkmanfried tried to play down rumors of a conflict between FTX and Binance. He said the acquisition of FTX by Binance is the best possible thing.
Why did the FTX and Binance contract fall apart?
Last Wednesday, just one day after the initial statement, Binance said in another statement that it had no intention of acquiring FTX. Binance said the decision was “the result of careful corporate due diligence.” Binance also said possible investigations by US regulatory bodies and reports of mismanagement of user funds by FTX played a role in the decision.
“Every time a major player in the crypto industry fails, consumers suffer,” Binance said in a statement. In the last few years, we have seen an increase in the resistance of the crypto ecosystem and over time we have come to believe that “Isolationists who misuse user funds will be eradicated by the free market.”
FTX said Thursday it has reached an agreement with blockchain platform Tron to transfer a series of special tokens from FTX to other cryptocurrency wallets. Even this action did not lead to a positive result.
Why did the FTX crisis have a negative effect on cryptocurrencies?
For years, the cryptocurrency industry has been trying to convince regulatory bodies, investors, and regular customers that it is worth paying attention to. FTX looked – at least from a distance – more stable than most companies in the industry. The fall of this big exchange and of course the sale of the FTT token by Binance has caused panic in the cryptocurrency market and has had a significant impact on it.
Since Tuesday of last week, the FTT token price has dropped more than 80%. The prices of Bitcoin and Ether, two of the most important cryptocurrencies in the world, have also been experiencing severe fluctuations since Tuesday. The price of these two cryptocurrencies dropped by more than 20% in a relatively short time.