Binance’s Changpeng Zhao emerges as ‘winner on all fronts’ of FTX acquisition

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See relat­ed arti­cle: What could Binance gain from FTX’s wider investments?

The rela­tion­ship between two of the world’s largest cryp­to exchanges has come full cir­cle, with the Binance founder Chang­peng Zhao offer­ing to buy the FTX exchange in which he was an ear­ly investor

On Wednes­day, CZ announced on Twit­ter that he signed a let­ter of intent to acquire Sam Bankman-Fried’s exchange and save it from an ongo­ing liq­uid­i­ty crunch. The pend­ing deal has rocked the cryp­to indus­try, with its mar­ket cap falling more than 10% in 24 hours, accord­ing to Coin­Mar­ket­Cap

Some indus­try experts say that only one win­ner has emerged from the unex­pect­ed devel­op­ment, and that is CZ, with Binance gain­ing good optics and one of the world’s largest cryp­to busi­ness­es, val­ued at more than US$30 bil­lion

In an email to Forkast, Clara Medalie, research direc­tor of cryp­to data firm Kaiko said the acqui­si­tion would posi­tion Binance as an “absolute behe­moth in the industry.”

“The exchange was already the world’s largest before FTX’s liq­uid­i­ty trou­bles, and should the acqui­si­tion go through, it stands to con­sol­i­date the vast major­i­ty of mar­ket activ­i­ty.” Medalie added that Binance’s trade vol­umes are already larg­er than more than 10 of its next clos­est com­peti­tors combined.

“He’s a win­ner on all fronts,” said Justin D’Anethan, the insti­tu­tion­al sales direc­tor at Amber Group, a Hong Kong-based dig­i­tal asset plat­form, in an inter­view with Forkast. “A lot of users and funds have already gone from FTX to the safe­ty of Binance, which now looks like one of the more secure plat­forms and play­ers in the space.” 

Hav­ing your cake and eat­ing it too 

A main rea­son Binance’s planned acqui­si­tion appears to be a major win for CZ is the fact that he has already cashed out on a 2019 invest­ment in FTX, accord­ing to D’Anethan. When with­draw­ing the invest­ment from Bankman-Fried’s exchange last year, the com­pa­ny received a sum of FTT tokens, accord­ing to CZ. 

The Binance founder decid­ed to announce his inten­tion to dump all the tokens into the mar­ket fol­low­ing some investor jit­ters about Bankman-Fried’s cryp­to trad­ing firm Alme­da Research. Report­ing about Almeda’s bal­ance sheet began cir­cu­lat­ing at the start of the month, claim­ing that the company’s col­lat­er­al pri­mar­i­ly con­sist­ed of FTT-relat­ed assets. FTT is the native cryp­tocur­ren­cy of the FTX exchange. 

Some experts spec­u­late the bal­ance sheet was the source of CZ’s “new rev­e­la­tions,” which led him to cut ties with FTT as a secu­ri­ty mea­sure, while oth­ers believe he timed his announce­ment strate­gi­cal­ly. CZ has denied any orches­tra­tion of FTT’s price decline.

Either way, the news of Binance, the world’s largest cryp­to exchange, unload­ing FTT pushed prices of the token down, fur­ther high­light­ing investor con­cerns about Alme­da Research and its con­nec­tion to FTT and FTX. 

“Effec­tive­ly, CZ pushed the val­u­a­tion of Alme­da and FTX down to the brink of implo­sion… this gave him the abil­i­ty to rebuy his pri­or invest­ment after hav­ing already cashed out at a much high­er price,” said D’Anethan. 

Despite mar­kets tak­ing a hit and every­thing seem­ing­ly play­ing into CZ’s hand, D’Anethan says he does not expect the cryp­to space to take much issue with Binance’s actions over the past week.

“A lot of investors under­stand CZ’s per­spec­tive,” he said. The tokens fell into CZ’s lap after divest­ing from FTX, there were con­cerns about FTT’s finan­cial sta­bil­i­ty, and it was with­in Binance’s right to sell to who­ev­er want­ed to buy, added D’Anethan.

“The oth­er per­spec­tive is that the announce­ment came at an oppor­tune moment, and it did put FTT and a lot of users and investors in jeop­ardy, but I guess a lot of peo­ple will con­clude that’s just how busi­ness is done,” he said. 

“Admit­ted­ly, you may see that busi­ness play out a bit more vio­lent­ly in cryp­to mar­kets because we’re still rather unreg­u­lat­ed and a lot freer than tra­di­tion­al finance.” 

A lot remains to be seen about the Binance-FTX deal and how it devel­ops. It is pos­si­ble that the acqui­si­tion will not go through or that reg­u­la­tors will block it. But for now, it seems that Binance has man­aged to cash out on its ear­ly invest­ment in FTX while assum­ing own­er­ship of its exchange and the man­tle of mar­ket consolidator. 

See relat­ed arti­cle: Binance’s pend­ing acqui­si­tion of FTX may attract atten­tion of antitrust regulators



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