Crypto shock

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The crypto world was shaken yesterday as Binance’s CEO, known as “CZ”, announced the acquisition of their competitor, and the third-largest crypto-exchange, FTX.

This was not a long, or particularly friendly, courtship — and it has sent shockwaves through the world of digital assets, with BitcoinEthereum and most major cryptocurrencies falling sharply in the last 24 hours.

Crypto clash

CZ and FTX founder Sam Bankman-Fried have clashed on social media for many months. That rivalry escalated over the weekend when Binance announced they would be selling their ~$530m of FTT, the native token of the FTX exchange, citing fairly cryptic “recent revelations”. Over the next few days, FTX faced urgent solvency issues — halting withdrawals from the platform on Tuesday, a death knell for confidence in any exchange — with investors fearing a repeat of the TerraUSD collapse from May.

That left FTX, which itself had been a white knight to troubled firms over the summer, to turn to one of the few companies large enough to help solve what was described as a “significant liquidity crunch” — its rival. Binance will now act as a backstop for users, though the situation remains incredibly fluid.

This saga marks an incredible fall from grace for FTX. Having been backed by prominent investors like Sequoia, and celebrities such as Tom Brady, FTX was most recently valued at $25bn in October. Given the last-minute nature of this fire-sale, that valuation has almost certainly evaporated, with any eventual deal likely to be for pennies on the dollar.