One of the largest crypto exchanges, FTX, in the market has been bailed out by rival platform Binance after a “liquidity crunch” left it near to collapse.
In a Twitter post, the chief executive of Binance, Changpeng Zhao, gave details of a non-binding agreement sealed between the two firms.
"This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding [letter of interest], intending to fully acquire [FTX] and help cover the liquidity crunch," wrote the Binance boss.
The potential acquisition does not cover FTX’s US operations. Binance also has “the discretion to pull out from the deal at any time”, according to Zhao.
FTX had seen a marked rise in customer withdrawals that then accelerated on Monday when Binance announced that it was divesting its entire holding of FTX’s native FTT token due to concerns over FTX’s financial stability. By Tuesday morning, FTX had suffered roughly $6 billion in customer withdrawals in 72 hours.
Despite initially posting that a “competitor is trying to go after us with false rumours”, the billionaire owner of FTX Sam Bankman-Fried then later confirmed the deal struck with Binance.
"I know that there have been rumours in media of conflict between our two exchanges; however, Binance has shown time and again that they are committed to a more decentralized global economy while working to improve industry relations with regulators. We are in the best of hands," tweeted Bank-Fried.
Crypto investors’ initial reaction to the news led to a 17% plunge in the value of bitcoin, while another major exchange Coinbase saw its share price fall by 14%.
Should the acquisition be completed, it would leave Zhao and Binance in a dominant position within the crypto exchange market.
Two other major crypto exchanges, Coinbase and Gemini, announced hiring freezes and job cuts earlier this year in reaction to the so-called crypto winter, which has seen the valuation of several digital currencies fall considerably.
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