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FTX Agrees to Sell to Rival Binance Amid Crypto Exchange Liquidity Scare

After weeks of rumors that FTX and corporate sibling Alameda Research were experiencing a liquidity issue, Binance announced on Nov. 2 that it had agreed to acquire competitor cryptocurrency exchange FTX.

The merger, which was announced in tweets like so much else during the nearly week-long drama, brings together two of the biggest names in cryptocurrency trading. Binance is the largest cryptocurrency exchange by volume, and FTX was valued at $32 billion at the beginning of this year. Financial details of the purchase were not made public, despite the fact that FTX US, a separate division of FTX, was not a part of it.

The FTX CEO Sam Bankman-Fried tweeted on Tuesday, "Things have come full circle, and’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for (pending DD etc.),"

Changpeng "CZ" Zhao, CEO of Binance, also announced the agreement on Twitter, stating the two exchanges had signed a non-binding letter of intent. Both Bankman-Fried and Zhao stated that a thorough due diligence procedure would start in the following days.

The purchase follows a CoinDesk scoop last week that raised questions about Alameda Research, FTX's corporate sibling, and its over-reliance on illiquid coins like its own FTT. Bankman-Fried established and owns the majority of both FTX and Alameda.

According to several analysts, the narrative implied that Alameda's finances—and potentially FTX's as well—were not as stable as previously believed.

Then, after the CoinDesk article revealed that a significant portion of Alameda's balance sheet was made up of FTT, Binance's CEO increased the pressure by declaring on Sunday that he intended to sell his holdings of FTX's FTT token. He tweeted, "Liquidating our FTT is just post-exit risk management, learning from LUNA. "We gave support before, but we won't pretend to make love after divorce. We are not against anyone. But we won't support people who lobby against other industry players behind their backs. Onwards."

CZ's choice reduced the cost of FTT. The CEO of Alameda, Caroline Ellison, then tweeted on Sunday that in order to lessen the impact on prices, she will purchase every FTT token offered by Binance for $22.

Early on Tuesday, as customers of FTX struggled to withdraw money from FTX, the situation deteriorated. Numerous customers voiced their complaints about their problems in FTX's Telegram group and on Twitter. Money withdrawal obstacles foreshadowed the bankruptcy of several more cryptocurrency companies in 2022.

Following the agreement, FTX's FTT token initially rose, but this only lasted a short time; after starting the day just under $20, it is currently trading at roughly $5.



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