CZ, the CEO of Binance, confirmed the acquisition of FTX.
Sam Bankman-Fried's trading firm Alameda Research has significant exposure to FTX (FTT) tokens.
Experts believe that this is the end of Alameda Research.
Changpeng "CZ" Zhou, founder and CEO of Binance, said that the company will fully purchase FTX.com.
The acquisition has also been confirmed by FTX founder Sam Bankman-Fried. However, many experts believe that the Binance FTX deal will almost certainly result in Alameda's insolvency.
Why Is Binance Acquiring FTX?
Binance CEO CZ announced on Twitter that the company intends to liquidate all of its FTX tokens and FTT assets. As per reports, Sam Bankman-Fried's trading firm Alameda Research has a large exposure to FTT tokens. As of June 30th, more than $3.5 billion in FTT tokens have been unlocked from Alameda's $14 billion in assets. Sam Bankman-Fried is also the founder of the FTX cryptocurrency exchange.
The strong connection between FTX and Alameda led to a significant sell-off of the FTT token. Caroline Ellison, CEO of Alameda, attempted to calm the market's volatility. She also offered $22 for Binance's FTT holdings. However, experts quickly pointed out that this offer was made because Alameda had hedged FTT at $22. Concerns about the insolvency of both FTX and Alameda began to circulate in the cryptocurrency community.
CZ revealed that Sam Bankman-Fried and FTX contacted Binance for assistance. He also indicated that FTX is experiencing a severe liquidity crisis. As a result, Binance will fully purchase FTX, one of its main competitors. The transaction was also confirmed by SBF.
Why Alameda Can Become Insolvent
Experts point out that FTX's request for assistance from Binance indicates that FTX has a massive hole in its balance sheet. Other significant investors were unable to assist FTX in addressing that void. Binance, on the other hand, is solely acquiring FTX. As a result, Alameda's liability to FTX continues.
In the last 24 hours, the FTX token FTT has dropped by 73%. This will undoubtedly intensify the stress on Alameda’s balance sheet. Experts predict that Binance will recover all outstanding liabilities from Alameda. This could lead to Alameda's insolvency.
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