Binance plans to buy FTX's non-U.S. operations in latest crypto bailout
The Hindu
The deal is the latest emergency rescue in the world of cryptocurrencies this year, as investors pulled out from riskier assets amid rising interest rates
Crypto giant Binance signed a nonbinding agreement to buy rival FTX's non-U.S. unit, FTX.com, to help cover a "liquidity crunch" at the cryptocurrency exchange, the companies said on Tuesday, in a surprise move that raised fresh concerns about the risks investors face in the volatile crypto market.
Binance CEO Changpeng Zhao said in a tweet that FTX, run by billionaire Sam Bankman-Fried, had "asked for our help" after "a significant liquidity crunch."
He said Binance, the world's biggest crypto exchange, will be conducting due diligence in the coming days as the next step toward the acquisition of FTX.com. The U.S. operations of Binance and FTX are not part of the deal, Mr. Bankman-Fried said in a separate tweet.
"It has been an open secret for a while now that FTX and Binance were in existential competition; the only surprise today is that things have escalated so quickly to a seeming conclusion," said Joseph Edwards, investment adviser at Securitize Capital. "The move should provide relief to consumers in the short-term, but creates question in the long run."
The deal is the latest emergency rescue in the world of cryptocurrencies this year, as investors pulled out from riskier assets amid rising interest rates. The cryptocurrency market has fallen by about two-thirds from its peak of $1.07 trillion.
It also underscores an abrupt reversal of fortune for Mr. Bankman-Fried, who had positioned himself as the industry's saviour by rescuing rivals who had gotten into trouble earlier in the year.
"Liquidity crunch issues continue to haunt the crypto market," said Dan Raju, CEO of Tradier, a financial services provider and brokerage. "It's scary to think that FTX, which is one of the largest crypto exchanges in the world, was bitten by liquidity concerns, and Binance, their biggest rival, is coming to their rescue. This will make for some strange bedfellows."
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