After throwing its fellow cryptocurrency exchange a lifeline from the recent liquidity crunch, research has shown that the deal to acquire FTX might benefit Binance much more than just gaining a major portion of the trading platform’s holdings.
In fact, according to a report by private wealth manager Bernstein, the combined company that would emerge from the purchase deal between Binance and FTX could give the former a more than 80% share of the global crypto market, CoinDesk’s Will Canny reported on November 9.
Catching regulatory gaze
Due to such implications, the FTX-Binance deal could attract significant regulatory attention and possibly even intervention, especially from the United States and European agencies, if FTX has investments in their jurisdictions.
Picks for you
Analysts Gautam Chhugani and Manas Agrawal explained that “all eyes are immediately focused on the probability of the deal” and that any chance of the agreement’s failure was bearish for the digital asset industry.
To avoid getting in trouble, the report highlighted, Binance would need to investigate any possibility of a shortfall in terms of customer funds and if there were any “wrongdoings from diversion of customer funds to related parties or unauthorized purposes.”
Should FTX’s finances show inconsistencies, it would mean that “Binance would acquire FTX as a fire sale, by making whole the customers,” which would lead to investors bringing into question the legality of FTX’s conduct, the note stressed.
Finally, the analysts concluded that the problematic situation in terms of FTX’s balance sheet could result in an “extremely disastrous outcome for investors.”
FTX crisis spills over
Meanwhile, the market is already suffering the consequences of the drama surrounding FTX, wiping out $100 billion from its market capitalization in a single day, whereas the price of Bitcoin (BTC) sank below $18,000, as Finbold reported.
As a reminder, the trouble started when Binance liquidated all of its FTX Token (FTT) holdings in response to the revelation that the balance sheet of Sam Bankman-Fried’s trading firm Alameda Research mainly consisted of FTT, demonstrating a close connection between the two sides of his business.
This led to some social media quarreling between the two exchanges but ultimately ended with FTX reaching out to its rival for help and Binance offering a bail-out in the form of a non-binding purchase agreement.
At press time, FTX Token was changing hands at the price of $4.42, crashing 74.28% on the day and 82.72% across the week, adding up to the cumulative monthly losses of 81.50%, after $2.5 billion bled out of its market capitalization.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
