Has the Binance and FTX War Pushed Us Closer to the Bear Market Bottom?

Unless you’ve been living under a rock for the past few days, or aren’t part of the crypto scene in any way, shape, or form… it’s impossible to have missed the news regarding Binance and FTX. But, has this occurrence alongside other factors pushed us closer to the bear market bottom that the ‘buy low, sell high’ mantra preaches? 

The team here at Crypto Lists explore more about this fascinating – and excitingly volatile situation. One which is an enormous event in the cryptocurrency space and could bring lower lows than previously imagined. Or, indeed we could be on the precipice of a bull run in Q4 2022 or Q1 2023. Let’s dive deeper…

CEOs go to war

Unfortunately we’re not discussing a new remix of the famous song by Frankie Goes to Hollywood, but instead the war between the Binance and FTX tribes. More specifically, the war between their Founders and CEOs. Sam ‘SBF’ Bankman-Fried and Changpeng ‘CZ’ Zhao, respectively. But what happened exactly?

Binance, one of the original crypto exchanges as well as the world’s largest, has agreed to buy a major competitor: FTX. CZ confirmed the deal on Twitter, saying that the two parties had signed a non-binding letter of intent.

This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days.

— CZ 🔶 Binance (@cz_binance) November 8, 2022

The market reacts

The enormous collapse of FTT, FTX’s native coin, coincided with an overall market downward tumble as traders reacted to the news. The aftermath has been felt across the space. BTC/USD lost $2,000 in under two hours, seeing a quick drop which set a low of $17,120 not seen since June this year. And Solana (SOL) dropped below the $20 mark for the first time since April 2021. The ‘Ethereum Killer’ has dropped several places in the market cap list and analysts are pessimistic about the near-future of the coin, despite being bullish on its prospects for the longer term given the enormous ambitions of the company.

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Is Sam Bankman-Fried or CZ the ‘Bad Guy’ in the FTX drama?

Obviously such a question is subjective, and in the ego-filled arena of top-level business there are always tussles and spats. However, such is the nature of crypto and its relative infancy – that an argument between two CEOs in the space can trigger market earthquakes. The likes of which we haven’t seen since the Terra LUNA debacle in May. And with FTX having withdrawal delays, as reported yesterday in a Crypto Lists newsflash it’s understandably causing alarm among casual and experienced investors and traders alike.

But who is to blame here? Once a poster boy for the crypto space, Bankman-Fried has come under scrutiny for apparently only seeing blockchain as a way to get wealthy as opposed to holding any higher ideals about the innovative technology. Moreoever, as a political donor of large proportions, he also supported what was seen as an anti-crypto bill that would see decentralized finance regulated and he argued against financial privacy. Quite the opposite of the utopian libertarianism that defines many of crypto’s pioneers and innovators. Perhaps most notably Bitcoin’s founder ‘Satoshi Nakamoto’.

On the other hand we have CZ, whose company saw a £500m transaction of FTT coins late last week. He tweeted at the weekend, that Binance “won’t support people who lobby against other industry players behind their backs” in an apparent swipe at SBFs political machinations.

Zhao later shared some words of wisdom in the aftermath of the drama, posting on his much-followed Twitter page.

Never use a token you created as collateral. Don’t borrow if you run a crypto business. Don’t use capital ‘efficiently.’ Have a large reserve.

CZ, November 8, 2022

Cynics will say it’s just another backroom deal by two big hitters, the truth may never come to light as the most important discussions happened behind closed doors.

Where do we go from here?

Binance’s letter of intent is not binding, as mentioned earlier. Therefore, should the deal not go though, FTX will have to plug an enormous hole. The CEO of Coinbase chimed in with his take, stating on his Twitter page that there are a couple of reasons why a deal might not make sense for the parties involved. However, he didn’t extrapolate. He noted: “It’ll probably come out eventually … it may be a bad situation if this deal doesn’t go through for the customers involved.”

Regarding general market termoil, it remains to be seen where prices will be at the close of play today, or the end of the week. Crypto prices tend to drop slightly on Fridays and have a weekend lull. But after this week’s events, anything is on the cards.