Reasons for Binance to Withdraw from FTX Deal

UTC by Tolu Ajiboye · 3 min read
Reasons for Binance to Withdraw from FTX Deal
Photo: Unsplash

Binance is reportedly having second thoughts about acquiring FTX after reviewing the embattled exchange’s financials.

Although Binance appears set to acquire embattled Bahamian-based crypto exchange FTX, fresh reports suggest this may no longer be the case. According to CryptoPotato, the Changpeng Zhao-led crypto exchange may be on the verge of backing out from the FTX deal. Reports that Binance may withdraw from financially supporting its rival exchange come only a day after the announced buyout.

Following reports of Binance’s reversal, crypto markets sustained another major hit, with Bitcoin (BTC) now trading around $17K, its lowest this year.

New Development in Acquisition Deal

According to an inside source, Binance decided against completing the FTX transaction after reviewing the financials of the Sam Bankman-Fried-led exchange. Both companies announced the buyout deal yesterday, which saw FTX experience a deluge of withdrawal demand from concerned users.

At the time of the announcement, Bankman-Fried explained that Binance’s assistance would be instrumental in several areas. The aid will help to protect customers, erase liquidity crunches, and ensure a healthy parity in the backing of assets. The FTX founder and chief executive officer explained:

“Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in. It may take a bit to settle etc. – we apologize for that.”

Also, following the announcement, Bankman-Fried expressed faith in handing over the affairs of his company to Binance. According to him, Binance’s track record speaks for itself, and FTX is “in the best of hands.”

Bankman-Fried’s comments also came amid the dwindling value of his exchange’s native token FTT. The FTX token has been on a downward spiral lately amid liquidity concerns. This plunge has also seen around $1 billion in FTT market value wiped off.

Binance Always Remained Non-Committed to FTX Deal

When Binance chose to step in and offer FTX a veritable bailout, Zhao clarified that the deal was non-binding. According to the Binance chief executive, “this is a highly dynamic situation, and we are assessing the situation in real time. Binance has the discretion to pull out from the deal at any time. We expect FTT to be highly volatile in the coming days as things develop.”

In addition, Zhao asked those involved in the deal not to provide any public or internal comments on its development. Furthermore, he appealed to those not directly involved to refrain from asking about it. According to the Binance CEO, things will play out. He also took to Twitter to share an internal note shared with global staff.

FTT initially rebounded sharply following the acquisition announcement, jumping as high as 25% from a low of $14. However, the token’s latest freefall resumed after reports that the crypto had halted withdrawals. As it stands, FTT is changing hands at around $4.16 compared to more than $22 at the beginning of the week.

Altcoin News, Blockchain News, Business News, Cryptocurrency news, Deals News
Tolu Ajiboye
Author Tolu Ajiboye

Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.

WhaleMaker
Related Articles
WhaleMaker