Yesterday’s blood moon was certainly an omen of things to come. A few hours after the celestial event, the crypto markets were decimated when the price of FTT, the token of FTX exchange, breached its $22 support. The cascading liquidations of Sam Bankman-Fried’s companies, nuked the token to a low of $2.52 where it had lost nearly 90% of its value in less than 3 hours. FTX, the 2nd largest crypto exchange in the world, was now in deep financial trouble and they halted withdrawals. What happened next even I did not expect. After triggering the sell-off that destroyed his competitor, CZ of Binance has swooped in to buy FTX and in doing so he will fulfil the distressed exchange’s withdrawal obligations. This could very well be the biggest power move we have ever seen in crypto and just goes to show that CZ can be absolutely ruthless if you attempt to cross him. I’ll be covering all this plus more in today’s video but if you need the backstory to all this, check out the video I published a few days ago which predicted most of what we’ve seen unfold. Subscribers of my channel have been some of the most informed people in the industry, so subscribe now if you want to get the best analysis on these kinds of events as they’re taking place.
Following from where I left off in the last video, Sam Bankman-Fried had been attempting to calm his customers in now deleted tweets by saying that “a competitor is trying to go after us with false rumours. FTX is fine, assets are fine. FTX has enough to cover all client holdings. We don’t invest client assets even in treasuries. We have been processing all withdrawals and will continue to.” Clearly that didn’t age well, but Sam did confirm that CZ of Binance was indeed coming after him. Sam deleted another recent tweet that targeted CZ, saying “excited to see him repping the industry in DC going forward! Uh, is he allowed to go to DC, right?”. While many pundits fell for what CZ put out on Twitter, believing his claims about transparency and that his actions were not about hurting competitors, I was pointing out that what CZ was doing was calculated and intentional. I now believe that the feud between the two parties goes back as far as 2019, when CZ tweeted out “a market maker from a smaller futures exchange tried to attack Binance futures platform. No one was liquidated, as we use the index price for liquidations. Only the attacker lost a bunch of money, and that was that.” In a since deleted Tweet, which I recovered, he went on to give very specific identifying information. “The attacker is a well-known account that trades with Binance, and started their own futures exchange a few months ago. This was the 2nd attempt they tried. Shame!”. Let’s google when FTX was founded, shall we. Oh, well imagine my shock. I don’t know for certain if this was the beginning of the beef between CZ and SBF, but it sure looks like it. All these years, CZ has been biding his time while SBF has continued to provoke him. It seems that with the alleged “leak” of the Alameda Research balance sheet, CZ saw an opportunity and he took it. Either that or the whole thing was planned and coordinated in response to SBF’s push for crippling DeFi regulations, with CZ knowing there would be little sympathy for him.
There is even further evidence that CZ intended to do this. When the Alameda CEO offered to buy Binance’s FTT holdings OTC at $22, CZ chose to continue selling on the open market to add immense selling pressure and collapse the price of the token. He was willing to burn hundreds of millions of dollars of his company’s money, and crash the entire cryptocurrency market, to achieve that outcome. And he did. Since Sunday, when news about SBF’s precarious situation began to spread, Bitcoin dumped by as much as 20%, Ethereum is down as much as 25% and Dogecoin has nearly erased any Elon Musk Twitter gains after dropping by up to 37%. Solana, a project with close ties to SBF and FTX, is down by as much as 46%. It is presumed that Bankman-Fried had to sell a bunch of his holdings in SOL to prop up FTT, which ultimately failed as evidenced by the FTT chart. The extent of the dump here very much stayed true to what I drew a few days ago. By going into the hourly chart, we can see that see that once the $22 level was lost, things went downhill very quickly. It dropped by 88% in less than 3 hours.
Sam Bankman-Fried had no choice but to raise the white flag and bow to the will of CZ. Posting to Twitter, SBF said “hey all, I have a few announcements to make. Things have come full circle, and FTX.com’s first and last investors are the same. We have come to an agreement on strategic transaction with Binance for FTX.com, pending due diligence. 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. We apologize for that. But the important thing is that customers are protected. A huge than you to CZ, Binance, and all our supporters. This is a user -centric development that benefits the entire industry. CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem and creating a freer economic world. I know that there have been rumors in the 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.” Ladies and gentlemen, that is what a statement written under duress looks like. And yeah, I’m sure there is no conflict between SBF and CZ. Despite all those deleted Tweets we saw, it’s just a conspiracy theory. CZ then came out and confirmed that “this afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding letter of intent, intending to fully acquire FTX.com and help cover the liquidity crunch. We will be conducting a full due diligence in the coming days. There is a lot to cover and will take some time. 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. Stay SAFU.” When I first read this, I was completely blown away. Not only did CZ instigate this crisis, by exploiting a weakness that Sam Bankman-Fried exposed himself to and posting about it on Twitter to cause a bank run, but CZ is now playing the part of the hero who will save all the FTX customers from getting rekt. Truly, the man is cutthroat.
Following this major announcement FTX went on to halt withdrawals, after already processing over $6 billion in withdrawals over the last few days. Bloomberg updated its billionaires index, estimating the net worth of SBF to now be $991.5 million after sitting at $16 billion the previous day. Crypto Twitter also began to react to the news, with Edward Snowden coming up with his own CZ quote “what is best in life? To crush your enemies. See them driven before you. And to hear the lamentations of their women.” Then there were several gold-tier memes; my favourite was an image posted by Do Kwon that shows SBF bowing down to CZ. Zhu Su even came back to Twitter, after months of silence and being on the run, to say GM. Su and Kwon then got together on a podcast with fellow ponzi schemer, Martin Shkreli, to unironically give their take on the implosion of FTX. This timeline man. For a more level-headed take on the situation, we’ll now listen to the CEO of Coinbase, Brian Armstrong, who said this in response to a question asking whether Coinbase would consider buying the U.S. arm of FTX. <play video> What Brian correctly raises is that the deal is not yet final, and he seems to allude that it will not go through due to some fact that is not yet public information. Does CZ really intend to acquire the exchange or was it part of some larger scheme to get FTX to admit it was now insolvent? Maybe he is buying them time to find other investors and prevent the crypto markets from fully imploding?
Whatever the case. It’s crazy that just a month ago FTX exchange was regarded as one of the most trusted, well-funded entities in the crypto industry. They went from bailing out failing companies and sponsoring the Super Bowl, to now needing bailing out themselves. Which begs the question, despite winning this round, is Binance as stable as it presents itself? CZ is promising transparency on Binance, in the form of merkle-tree proof-of-reserves, so we’ll soon see if he delivers. If he can, then hopefully Binance will lead the way for the rest of the industry, and we can prevent disasters like these from happening ever again.