CZ took FTX but detonated the crypto world of True Lehman

At 0:00 a.m. on November 9, SBF tweeted on its social media account:

“Hey everyone, I have a few things to announce.

Things have gone full circles and we have reached a strategic deal agreement with FTX’s first investor and the last Binance (pending due diligence). Our team is clearing the withdrawal backlog as it is, which will eliminate the liquidity crunch; All assets will be overwritten 1:1. This is one of the main reasons we asked Binance to join. This may take some time to fully resolve and we apologize for that.

Many thanks to CZ, Binance and all our supporters. It’s a user-centered development that benefits the industry as a whole. CZ has done incredible work in building a global crypto ecosystem and creating a freer economic world, and will continue to do so in the future. I know there have been rumors in the media about a conflict between our two trading platforms, but Binance has repeatedly stated that they are committed to building a more decentralized global economy while working to improve relationships with regulators. He’ll take care of everything. (Note that two separate companies, FTX.us and Binance.us, are not currently affected by this.) FTX.us withdrawals are always available, the asset fully supports 1:1 coverage and is working fine. )」

10 minutes later, CZ followed with the post:

“This afternoon, FTX came to us for help due to a severe liquidity crunch. To protect our users, we have signed a non-binding letter of intent (Binance) with the intention of acquiring (FTX) entirely. We will conduct a full investigation into this matter in the coming days. There’s a lot to cover and it will take some time. This is a highly dynamic situation and we are evaluating it in real time. Binance reserves the right to withdraw from the transaction at any time. As events unfold, we expect FTT prices to fluctuate significantly in the coming days.”

This unprecedented showdown, which involved billions of dollars and caused a sensation inside and outside the industry, ended abruptly in less than 48 hours with one or two understated tweets. After 1 year and 3 months, FTX is back in the arms of Binance. As soon as the news was announced, FTT and BNB soared for a short time, with a maximum increase of more than 40% in 15 minutes.

In fact, FTX and Binance have a long-standing grudge, and after the two officially announced their parting ways in July 2021, there have been constant frictions (BlockBeats note, see “FTX and Binance War Escalates, from hooking up to-for-tat 》)。 From the launch of leveraged tokens, to the acquisition battle of crypto institutions such as Voyager, to the recent CZ response to its own identity and nationality, there are alluding to the tug of war and confrontation between the two crypto giants. Today’s head-on confrontation with Binance’s acquisition of FTX and SBF playing coins ending with Zhao has drawn another “Lehman segment” for the crypto industry.

48 hours of horror

The incident originated from an article published by CoinDesk on November 2. The article, titled “Divisions in Sam Bankman-Fried’s Crypto Empire Blur on His Trading Titan Alameda’s Balance Sheet,” reveals a private financial document pointing to the possible debt situation of SBF’s crypto trading giant Alameda Research at present.

The article pointed out that most of Alameda’s balance sheet assets are FTX platform Token FTT. As of June 30, Alameda had $14.6 billion in assets, with the largest single asset being $3.66 billion worth of FTT, and other significant assets including $3.37 billion in SOL and the Solana eco-token. Liabilities amounted to $8 billion, mainly $7.4 billion in loans.

As soon as the article was published, it began to ferment in the community, and FUD sentiment continued to accumulate. In the early morning of the 6th, a Twitter user named Autism Capital posted that FTX’s “sworn enemy” Binance had transferred the remaining $23 million worth of FTT on his account to the trading platform. After the news came out, the community once again reacted, and the price of FTT fell.

CZ took FTX but detonated the crypto world of True Lehman

On the evening of the 6th, Alameda made a positive response, CEO Caroline Ellison issued a response on social media to the recent rumor that “Alameda/FTX may be insolvent” rumors, saying that the online version of the balance sheet actually only lists part of Alameda’s assets, and Alameda has more than $10 billion in funds that have not been listed in the balance sheet.

Caroline added that the online version of the balance sheet lists only a few of Alameda’s largest long positions, but Alameda clearly has other hedging assets. Given the tightening of the crypto credit space this year, Alameda has now repaid most of its loans. After the tweet, the FTT price recovered to around $24.

CZ took FTX but detonated the crypto world of True Lehman

Shortly after, CZ posted that Binance had received about $2.1 billion in cash equivalent (consisting of BUSD and FTT) after exiting its FTX stake last year. As a result of recent revelations, Binance decided to liquidate all remaining FTT on its books. Binance will try to do so in a way that minimizes the impact on the market. Due to market conditions and limited liquidity, the sell-off is expected to take several months to complete. Binance has always encouraged cooperation among industry players, and this sell-off has nothing to do with “targeting competitors.” After the CZ tweet, the FTT price quickly dropped from around $24 to around $21.

CZ took FTX but detonated the crypto world of True Lehman

Immediately after, Alameda CEO Caroline Ellison responded to “Binance Clearance FTT” on social media, saying that if Binance founder CZ wants to minimize the impact of clearance on the secondary market, Alameda is now very willing to earn $22. After the tweet, the FTT price recovered to $22.

CZ took FTX but detonated the crypto world of True Lehman

In just one day, nearly $1 billion in assets have flowed out of FTX and Alameda’s wallet addresses, thanks to the cascade effect of community information and Binance’s sale of FTT. SBF responded on the afternoon of the 8th, accusing competitors of deliberately smearing and emphasizing the platform’s ability to cover all users’ assets in an attempt to appease the market and FTX users. However, SBF’s response did not have much effect, there are still a large number of customers on the platform transferring funds, the stablecoins on FTX are rapidly drying up, and even the stablecoins that have just entered the platform are almost immediately depleted (Figures 2 and 3).

CZ took FTX but detonated the crypto world of True Lehman

CZ took FTX but detonated the crypto world of True Lehman

CZ took FTX but detonated the crypto world of True Lehman

Now, FTX and Alameda not only need to pay users for withdrawals, but also deploy capital to defend the value of FTT, and Alameda’s related wallet addresses have begun to frequently transfer assets from major exchanges to FTX. Meanwhile, CZ added fuel to the fire, replying with a shrugged emoji under a tweet questioning Alameda’s $22 buyback commitment. It also directly angered FTX Digital Marketplace CEO Ryan Salame, who quoted CZ directly on Twitter to express his displeasure with the sell-off of FTT in the open market.

CZ took FTX but detonated the crypto world of True Lehman

As panic piled up, a large number of speculators began to pour in through the contract market, and within hours, the trading volume of FTTUSDT perpetual contracts on Binance surged from $20 million to around $40 million, and the long-short competition was fierce. Alameda also tried to defend FTT, and the exchange rate between FTX and Binance pushed the exchange rate between FTX and Binance to an all-time high. After several rounds of tug-of-war, FTT fell below the $22 mark and slipped all the way to around $15.

CZ took FTX but detonated the crypto world of True Lehman

CZ took FTX but detonated the crypto world of True Lehman

Seeing the two giants fighting shakily, many people began to realize the hidden dangers that this life-and-death duel may bring to the entire crypto industry. On the afternoon of the 8th, OKGroup founder Xu Xingxing posted on social media: “If FTX unfortunately becomes another LUNA, then no one, including Binance, can benefit from this accident.” Both customers and regulators will lose some confidence in the industry as a whole. I hope CZ can consider stopping the sale of FTT and making a new agreement with SBF.”

CZ took FTX but detonated the crypto world of True Lehman

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The total collapse after the collective euphoria

After the announcement of the acquisition, the tokens of the two trading platforms instantly soared, with FTT recovering above $20 and BNB breaking through $370. The community is more lively, Meme graphic memes have been brushed the screen, and CZ has been praised as the “crypto emperor” in a short time.

CZ took FTX but detonated the crypto world of True Lehman

But tonight, when the blood moon was empty, God obviously felt that there was not enough reversal of things, and the spiritual carnival of the community was less than half an hour, and the FUD from the acquisition agreement itself and external supervision immediately killed the horse gun.

According to media reports, SBF had asked Wall Street and Silicon Valley billionaires for help before reaching an acquisition agreement with Binance to obtain $1 billion in bailout funds. But by midday on Tuesday, FTX’s funding gap had quickly risen to $5-$6 billion. There was a sudden awareness of the potentially huge hole in FTX. CZ then tweeted that all cryptocurrency trading platforms should do Merkle tree reserve proof. Banks operate on fractional reserves. This should not be the case with cryptocurrency trading platforms. Binance will soon begin doing proof-of-reserve, with full transparency.

CZ took FTX but detonated the crypto world of True Lehman

Immediately afterwards, the transaction for Binance’s acquisition of FTX attracted the attention of antitrust regulators everywhere. According to the CoinDesk article, regulators have the power to block a major merger if they are concerned that the acquisition will limit market choice, and there are strict laws prohibiting anticompetitive behavior.

Thibault Schrepel, an associate professor at the University of Amsterdam who specializes in blockchain and antitrust issues, tweeted: “Next time, check whether your tweet complies with antitrust laws before posting a message.” At this stage, I wouldn’t be surprised if CZ tweets are found in upcoming court filings/antitrust proceedings.” Schrepel believes U.S. law will apply to the case because the transaction affects FTX’s entire company, including its U.S. operations.

It was also reported that the deal must also be approved by the antitrust authorities of jurisdictions such as the European Union, and they also have the power to block mergers and acquisitions. For larger transactions, the European Commission can impose a turnover penalty of up to 10% if the company is approved “one step ahead”. Meanwhile, Steven Adamske, a spokesman for the U.S. Commodity Futures Trading Commission (CFTC), said he was watching the FTX event but that “any regulatory issues are unclear at this time.”

Suddenly, the market sentiment came to a 180-degree shift, immediately from a sharp rise to a sharp fall, FTT directly opened the liquidation mode, and the price instantly reached single digits. BTC and ETH were all affected, smashing through the price of several days of sideways. Even Robinhood in the Web2 world was implicated, with SBF owning 56 million shares of Robinhood, the third largest shareholder, Robinhood’s share price fell 18.83%.

CZ took FTX but detonated the crypto world of True Lehman

CZ took FTX but detonated the crypto world of True Lehman

From the euphoria of the masses to the collapse of the panzaar, the situation was so fast that people did not even have time to react to it. In each real-time Twitter space, from time to time there is news that other mainstream exchanges such as KuCoin cannot withdraw coins, and even the host’s panic can be felt. In less than 30 minutes, FTX went from being a lucky person to being a lucky person who was insured to a ghost who caused the mine. We have to sigh that FTX is the real Lehman Brothers in this encryption cycle. I also have to ask, what did CZ do?

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/cz-took-ftx-but-detonated-the-crypto-world-of-true-lehman/
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