FTX’s Collapse, Binance’s Leading Position, and the Crypto Market
Binance now officially backs out of FTX rescue while FTX has faced serious solvency problems. Earlier in the week, CZ exposed FTX’s problems and announced that he was going to dump $500 million of its FTX token on the market.
On November 08th, 2022, it was stated that there was a nonbinding agreement for Binance to buy FTX. Yet, Binance can withdraw at any time as it is a tentative deal. The forecast then was not too bright for FTX, which is now true. As Binance walks away from the FTX deal.
The noticeable fact is that the cash didn’t get FTX licensed for operation in the United States. Thus, Binance cannot access the market when owning FTX. There are no benefits that can persuade CZ to buy FTX. Yet, the collapse of the deal might put the crypto market on the edge.
Why Does Binance Walk out of the FTX Deal?
Solana and FTX-funded startups are the rivals to those on Binance’s BNB chain. So, if FTX fails, Binance can consequently win FTX’s clientele whether they make any deal or not.
From the standpoint of a market share and platform, FTX does not show any unique value or bring any good for Binance. As there are many competitors that have equal or even greater quality than FTX in the market.
Another reason is that the nonbinding agreement enables SBF to have a bit of breathing room to have alternative buyers on Wall Street. However, there were few possibilities that Binance can do it due to constant poking by CZ.
What Can We Expect in the Future?
The official statement that Binance walks out of the FTX deal puts the death sentence on FTX. Its FTT token has a trading price below $4, roughly an 80% of decrease since November 07th, 2022. The brand is having troubles that make it hard to regain consumers’ trust. FTX’s collapse will lead to a few developments and changes in the near future.
Time for the Consolidation Phase of Exchanges
When FTX collapses, Binance can go straight and solidify its leading position. Despite many exchanges in the market, they are too small or could not stand against the challenges of having users’ trust. The exchange market is going to become more ‘silent’ in the competition of a few big companies.
More Chances for Decentralized Exchanges and Lending
The flux of insolvency events such as Terraform Labs, Three Arrows Capital, Celsius Network, and Alameda Research raises doubt in the centralized lending business. Thus, the spotlight now belongs to decentralized lending, which ushers in long-term opportunities and innovation for DeFi — decentralized finance.
Regulation Will Be Tighter
As a result of many scandals in the crypto market, it is a need to have more comprehensive and detailed regulations in aspects of regulatory acts, financial licensing, and investor protection. Also, the regulation of centralized exchanges and DeFi will be strengthened in 2023.
No More Barbaric Unregulated Growth
In the near future, asset management institutions will carry out a set of strict risk control systems and finish audits to maintain a healthy, transparent, and open workspace and financial balance sheet. There will be a tendency that financial institutions actively seek compliance licenses and the overall industry in a more benign direction.
Before You Go
Good sides and bad sides always come together. The thing that matters here is whether you can see it or not. Hopefully, this article walks you through valuable insights into this historical event in the crypto market.
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