Binance and FTX are competing with each other for obvious reasons. Binance is the world’s largest cryptocurrency exchange. Until recently, FTX used to be the second largest, i.e., Binance’s biggest competitor. However, it wasn’t a passive competitor, as we can see from several points:
- Alameda Research’s role in the Terraform Labs collapse. The involvement is unproven, but the rumors circulated actively. Binance then lost about $1.6 billion, as reported by Changpeng Zhao.
- The aggressive strategy of “helping” crypto companies during the crypto winter, with CEOs of Binance and FTX becoming competitors.
- A piece by Reuters accusing Binance of assisting Iranian companies in evading sanctions by $7.8 billion. This point needs to be looked at in more detail, as many insiders see this article as the last straw.
The article published on Reuters has a custom character, and numerous factors point to Sam Bankman-Fried or his affiliates as the client. This “investigation” was harrowing for Binance because a few days earlier, the company had reported in a blog about its success in complying with sanctions against Iran.
What’s important here is to understand the global context. Changpeng Zhao is a Canadian citizen, and Binance is so out of touch with China that it had to be mentioned on the company’s blog. That said, there were reports that a media wave about the Binance-China connection was also started by FTX in late August. But all in all, there’s no smoke without fire, so the coverage of helping Iran, China’s partner, circumvent sanctions is a painful jab and looks like a follow-up to the same campaign to discredit Binance.
Yet Canadian citizenship doesn’t make Changpeng Zhao Canadian by blood, so with typical Oriental coolness, he waited for the right moment to strike with the same weapon right where it hurts — the wallet. CoinDesk’s report, which explicitly pointed out potential liquidity problems of Alameda Research and FTX, since most of the liquidity was backed by FTT, was the trigger.
Interestingly, the information about the asset structure came to CoinDesk in a “sealed document.” Moreover, its publication date, November 2, wasn’t chosen by chance. Next week, another Fed meeting was expected, along with the publication of an unemployment report and mid-term elections in the U.S. All these factors were to create the perfect background. Those would provide just the right backdrop for “fear, uncertainty, and doubt,” which is the FUD effect. Changpeng Zhao’s multiple throw-ins and statements following the report created a cumulative effect resulting in a collapse of FTT’s price and knocking the financial ground from under Sam Bankman-Fried’s feet, turning hypothetical liquidity problems into real ones.
Besides, Binance’s CEO backed up the information attack with market actions because he had FTT tokens worth $2.1 billion. Changpeng Zhao decided to liquidate them to minimize risks, but “in a way that minimizes market impact.” In doing so, Binance CEO argued the decision to sell FTX tokens was based on the experience with LUNA. Ironic, right?
If it were about money, Changpeng Zhao would most likely accept Alameda Research CEO Caroline Ellison’s generous offer to buy back all of his FTTs over-the-counter. However, money isn’t the point, obviously. Zhao’s current swing of to “buy or not to buy” FTX looks like blatant mockery and dancing on his defeated rival’s bones. Nobody is now likely to give $8 billion to cover FTX’s debts, which Bankman-Fried requested. Therefore, the company, which was “saving” the industry not so long ago, will probably disappear soon.
Given this background, the acquisition of FTX by Binance initially seemed irrational. What’s the point of taking on someone else’s multi-billion dollar debt? To “support the community?” It sounds nice, of course, but this is business, and nobody cares about “community interests” unless those interests directly affect profit-making. In this case, the “community” will move to Binance, at least a substantial part of it. According to Nansen, as of November 7, Binance has already seen $337 million in stablecoin inflows.
So, nothing personal, it’s just business.
P.S.: The column format makes it possible to operate not only with verified facts but also with rumors, speculation, and analysis of circumstantial factors. That’s why the column is the best analytical material for the Binance-FTX situation. Therefore, keep in mind that this material is “the author’s subjective opinion, which might not coincide with CoinsPaid Media’s opinion and isn’t meant to be an absolute truth.”
