Two of the top cryptocurrency exchanges have recently announced one of the strangest technology mergers in recent memory (and that’s saying a lot). Following a short but very public spat, Binance intends to purchase its competitor FTX. According to Bloomberg, on November 6th, Binance CEO Changpeng Zhao sold $529 million in FTX’s native token in reaction to “recent facts that came to light,” namely a CoinDesk article indicating FTX was experiencing a liquidity problem. As a result, FTX CEO Sam Bankman-Fried accused Binance of spreading “false allegations” about his firm while insisting that everything was “great.” However, by today, the two businesses had struck a takeover agreement, while recognising that Binance will assist in resolving a “liquidity bottleneck” hurting FTX transactions.
Data shows that FTX was in a very terrible situation. In an interview with TechCrunch, CryptoQuant revealed that FTX’s net crypto asset holdings had dropped by 83 percent in only two days. Withdrawals were apparently so problematic that FTX had to create stablecoin (crypto fixed to an external value) liquidity to execute the transactions via markets or other exchanges. In the last two weeks, the company’s stablecoin reserve has shrunk by 93 percent, and corresponding withdrawals had dropped to almost nothing by early this morning.
