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When I first read the news of Binance acquiring FTX I was quite bewildered. So if you are asking yourself “Is Binance acquiring FTX a good news or not”, here is my Point of View.
I have always been thinking that different Exchanges into the market are necessary to guarantee some kind of Decentralization.
I have to be honest: I did not see it coming.
When market started a timid bullish movement I thought that this could be a move like the one from Elon Musk back in 2021. You can give a look at some of his tweets here and how the market reacted.
Let’s make some history
Binance has been an early investor in FTX and after the launch, FTX started going strong, quickly becoming a Tier1 Exchange soon becoming a direct competitor of Binance.
What interest could Binance still have left to stay invested so much into a competitor that was stealing market share from them?
They should sell FTX but did not want to make it dump or else, so they agreed to take something around 2 billion dollars in FTT, the token used to pay fees onto FTX. FTT was actually not much liquid so Binance found some sort of 2B$ stuck into a not enough liquid market to take profit from it.
Telling that Binance was going to sell the tokens was of course a bad news for FTX users but especially for FTT holders. But the sale did not happen entirely when the news happened. Probably some FTT tokens from Binance were sold there, but let’s have a look at what happened in the last days. Anyway, some panic sellers (that this time were completely right) started selling FTT tokens.
To keep the market steadier, the Market Maker of Alameda started market making, to support the price and avoid too big out-flows from FTT tokens. But some leaks about the actual potential coverage of Alameda was spreading and it seemed that Alameda pockets were not so deep (and full) as many thought.
First sales happened on the 8th November (yesterday as I am writing) at 1.40 am UTC time.
During the day of the 8th November, a news was released, that Binance signed a non-binding Letter Of Intent to acquire FTX. Corresponding to the Green Arrow in the below chart
And when the bullish sentiment appeared into FTT token holders, making also the BTC market surging, a cold shower happened to FTT, dumping the price of more than 80% at its bottom.
Bitcoin suffered the same Cold shower but since volumes in Bitcoin markets are higher (and less centralized), the drawdown was limited to something around 12%.
So, when FTX and its founder started posting about being quiet, Binance was likely to make its final move, dumping the token.
In my humble opinion, Binance made an investment in FTX, they felt it becoming uncomfortable, they started a rumour, created some panic through social medias and making their biggest competitor collapse to buy it as cheapest as possible.
What is my takeover on this?
I personally hate this kind of dynamics since it’s something really threatening the real decentralization of the cryptocurrency ecosystem. That is why I keep suggesting my fellows to keep their cryptocurrencies into decentralized systems (Wallets, DEX and so on) to make sure they have their own money. Otherwise, even if they are suggesting to do Merkle Tree for Exchanges funds, we will never be sure what Exchanges are doing with our funds.
Are you evaluating Staking? Look for decentralized systems and do not be dazzled by bigger percentages or easier paths.
Are you trading? Keep on the Exchange just the active money you use for trading and put the rest onto Cold wallets or Wallets anyway.
One more thing: of course Binance could make this happen because they are the strongest into the market. But for doing such, being the strongest is not always enough: you have to be brave, smart and greedy enough to pursue such.
Add-on: I can’t say “luckily” or “unluckily” but maybe someone will look into this merge. I do not fully trust “human laws” but it seems that they can work as well!
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