This article summarizes the FTX drama that broke out in the crypto market.
1. How FTX (a multi-billion dollar company) almost died overnight
2. Why is this a god-level strategic move by CZ?
It started a few years ago, Binance was one of the early investors in FTX, but FTX started to grow wildly, they became the second largest exchange, and also reached a huge deal with Stephen Curry, Tom Brady marketing agreement.
They started out as friends, now they are rivals.
Binance first, FTX second (Coinbase and other exchanges are smaller).
Binance decided to sell its stake in FTX.
As part of the acquisition, they agreed to receive $2 billion of this in the form of “FTT,” a token created by FTX for transaction fees.
So for now, Binance and FTX are friendly competitors.
Binance has a lot of FTT ($2 billion).
Two days ago, CZ came out and said that SBF has been discussing them with regulators, lobbying in a way that hurts Binance.
Therefore, he publicly announced to his 7 million followers on Twitter that he would sell all of his $2 billion FTT holdings.
Anyone who holds FTT knows this is bad news.
$2 billion of selling pressure will crush the price.
So they started panic selling.
The price of FTT fell by 15-20% overnight.
No one wants to buy FTT (too risky, whales are about to sell), everyone wants to sell. So the price falls.
Alameda, the hedge fund/market maker that Sam started before FTX, is king, but sources have revealed that the king has no clothes on.
They have about $12 billion in assets, $7 billion or so in liabilities...but half their "assets" are in FTT tokens, which are plummeting and illiquid.
Alemeda may die. If Alemeda is in trouble, FTX may be in trouble too.
They're sort of a sister company. As a market maker for FTX, may also hold/trade client deposits. This relationship has been unclear for many years. (Perhaps Achilles' heel?)
But most people think of FTX as a blue chip company. Sam is famous.
They wait for Sam or Alemeda to show that their health is good, but their health is not good.
Sam tweeted that everything was "fine," which wasn't the case.
Alemeda’s CEO says they will “happy” buy FTT tokens when they drop.
But something tells us that even if the CEO said something with an exclamation point, they weren't happy to buy.
24 hours have passed, and if they had had the means, they would have shown it.
This is starting to feel like a "steady lads" moment before Luna's meltdown.
People panicked and started withdrawing funds from FTX. What if it crashes like Celsius, Blockfi, Voyager, Luna?
Withdrawals above $1 billion. FTX faces a liquidity crunch.
FTX has been silent and finally suspended withdrawals.
Then, SBF came out today and said they were doing a "strategic transaction" with Binance.
Strategic deal? CZ clarified this.
"FTX is in trouble. We bought them to save them."
Binance basically started a rumor, made a threat, and ended up acquiring its biggest competitor overnight. (transaction not yet completed)
For now, the drama is over. Crypto crisis averted.
If FTX fails, it will be a devastating blow to the entire crypto industry.
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