Fresh off twitter press, Binance Buys FTX after DD. In financial markets, things move slow until they go fast. For weeks, rumors circulated in crypto circles about potential solvency concerns at FTX. These were exacerbated by a leaked balance sheet from Alameda Research, showed billions in loans collateralized off FTT. A subsequent liquidation announcement by CZ, Binance Founder and CEO, fanned the FUD flames. Then, this morning at 2:48 GMT, the FTT token fell off a proverbial cliff. At the time of writing it’s trading at $4.60. While most expected some difficulties for FTX, Binance out-right buying the exchange was unexpected to say the least. If this deal closes it will dramatically change the crypto landscape. But who wins in this deal, who loses, and will Crypto be better off as a whole?
Winner: CZ and Binance
The feud between Binance and FTX is an open secret in the Crypto Industry. Binance was an early investor in FTX but FTX grew to be a massive competitor to the platform. Both CEOs are known for trading jabs on twitter, and general bad blood exists between the platforms. Binance received a large allotment of FTT tokens as part of their exit from FTX, and it’s not unreasonable to assume CZ’s sell announcement was a deliberate attempt to cripple the exchange. Ultimately, Binance removes a large competitor and reasserts market dominance not seen since the late 2010s. In all non-regulated markets, it will be difficult to compete with CZ’s juggernaut.
Coinbase is frustrating for many Crypto natives. It’s highly regulated, slow to innovate, and generally has higher fees than many other exchanges. In this scenario, however, these attributes serve to benefit the American-based exchange. Unlike FTX and Binance, there is no token to leverage. The transparency brought from quarterly financials makes Coinbase a more attractive place to park trading funds. Risks still exist (not your keys, not your crypto), but for non-sophisticated traders who value safely, Coinbase now has a much stronger value proposition.
Winner: Defi (in the long run)
Same Bankman-Fried is one of the highest profile crypto figures, and one of the most active proponents of intense defi regulation. It’s not his desire for regulation which gives many pause, it’s the severity. It’s well known he’s not a true believer in decentralization or permissionless systems. His vision of regulation is permissioned defi, which would benefit centralized trading platforms. We do not seek such a future. The hit to his credibility will hopefully diminish his advocacy amongst politicians who do not know the products they seek to regulate.
Loser: Sam Bankman-Fried:
SBF was out on twitter as recent as yesterday saying everything was fine at FTX. This turned out to be at best an untruth, and at worst a falsehood. The need for external liquidity seems to suggest the capital crunch is an existential threat, not a short term issue. For years SBF was hailed as a genius with the ears of both politicians and prominent crypto personalities. Now it seems his companies engaged in high risk behavior which put customer funds at risk. This capitulation to Binance only adds to his fall from grace.
Loser: Crypto as a whole (in the short term)
Lets face it, this came at a bad time. The market seemed to have found its footing, and general sentiment was improving. The asset-selloffs required for FTX to remain solvent will clearly push us into lower territory, and possibly set back adoption to those who see the litany of financial collapses which plagued the space in the past six months. Additionally, cryptocurrencies shall endure more scrutiny from governments in the immediate future. How we as an industry navigate these treacherous waters will determine whether pushes to regulate blockchain will be sensible or stifling.
Binance buying FTX is a watershed moment for cryptocurrency and blockchain technology. There are some clear winners and losers but we do not yet know the full effects of this merger. In these times of volatility, the most important thing you can do is make sure you’re not in this space alone. Whether it’s Palisade Crypto or elsewhere, make sure you’re plugged into a community that helps you navigate the ever-changing fortunes of this growing industry.