Explained: The Binance-FTX Big Race

Welcome to The Daily Moon. It’s a brand new week. And there’s another hack. Harmony Protocol’s Horizon Bridge had a $100 million crypto theft. A hacker exploited a network vulnerability to steal funds. Right now, Harmony’s team is scrambling to find the culprit and retrieve the bounty.

Moving on, today we talk about the bigger ambitions of Binance and FTX, and CoinFLEX is pausing withdrawals.

Photo by Kanchanara on Unsplash 

The Binance-FTX Big Race

Sam Bankman-Fried doesn’t hold back when it comes to crypto. The 30-year-old founder-CEO of FTX isn’t content being a crypto entrepreneur alone. He wants to build a one-stop shop for all things investment. But there’s someone else who has similar plans. Changpeng Zhao, founder and CEO of Binance.

Zhao and Bankman-Fried are contemporaries of the crypto industry. CZ launched Binance in July 2017, while Bankman-Fried launched FTX in May 2019.

But their approach to business is very different. Bankman-Fried is sprinting his way through the cryptoverse, driven by some moral responsibility to save this space. In fact, he has even set aside $2 billion for crypto acquisitions.

Zhao, on the other hand, is eyeing organic expansion. It is entering new markets and expanding in existing ones.

Today, Zhao and Bankman-Fried are the biggest competitors in the crypto world. Each one is outsmarting the other. And the ultimate contest for supremacy has begun.

The back storyThe two crypto bosses weren’t always rivals. Binance bought FTX shares in 2019. Back then, CZ, who saw “a bit of themselves in the FTX team”, had foreseen the exchange’s tremendous potential, particularly in the crypto derivatives space.

But things changed in 2021. Bankman-Fried bought him out. He said this would allow FTX more “operational flexibility”. SBF wanted to split, citing “differences” in how their businesses worked. And Binance, already having made a killing on their investments, completely exited FTX.

The game-plan FTX is using the acquisition route to expand. In 2020, it acquired BlockFolio to enter retail trading. Now there’s more:

1. It took over the Japanese fintech Liquid group.

2. It will offer white label brokerage services with the Embed acquisition.

3. Bankman Fried bought a 7.6% stake in crypto platform Robinhood

4. He reached for a portion of the equities market with his stake in IEX Group, a high-frequency trading platform

Simultaneously, he’s also being the big brother and bailing out companies. Bankman-Fried has bailed out crypto lending firm BlockFi for $250 million. The most recent save was Voyager Digital, which got a $200 million loan from Alameda Ventures, SBFs digital assets firm.

Meanwhile, Binance is planning “world domination” by buying up companies across sectors. It has:

• Acquired WazirX and invested in stablecoin firm BxB.

• Took over CoinMarketCap for $400 million.

• Bought crypto assets trading platform JEX and crypto wallet Trust.

• Acquired crypto visa issuer Swipe to expand into payments.

• Invested $200 million in publishing brand, Forbes.

Its arm Binance Labs has raised a $500 million kitty to fund Web3 and blockchain startups.

Who’s leading the raceBinance is the world’s largest crypto exchange with 24-hour volumes of ~$11 billion. FTX ranks second, with 24-hour volumes of ~$1.8 billion.

Zhao’s exchange is leading when it comes to crypto derivatives too. With a 24-hour futures’ volume of ~$48 billion, Binance is 7X bigger than FTX.

Unlike Bankman-Fried, Zhao is not a risk-taker. He’s making gradual but stable moves to expand. To avoid regulatory interference in the US, Zhao has moved to Dubai. This is amidst money-laundering allegations against Binance.

On the contrary, Bankman-Fried is pulling all strings to ensure favourable crypto regulations. He’s even promised donations of up to $1 billion to prevent a comeback of former US President Donald Trump.

All said and done, Binance is leading the race right now. But it’s too early to declare a winner yet.

Another Coin Freeze

Extreme market conditions have forced another crypto exchange to hit pause. CoinFLEX is halting all withdrawals till conditions improve. It’s blamed ‘uncertainty involving a counterparty’ as one of the reasons.

Who’s responsible?We don’t know that yet. But CoinFLEX CEO Mark Lamb has clarified that Three Arrows Capital or any other lending firm isn’t responsible.

For now, the exchange is also halting trading of its native token FLEX Coin in the short term. This applies to spot and perpetual trading. CoinFLEX will offer more clarity on June 27.

But Lamb says that the exchange is ‘confident’ about fully repairing this situation. CoinFLEX estimates that withdrawals could begin by June 30.

The crypto bear market caused Celsius and Babel Finance to suspend withdrawals. Voyager Digital has slashed withdrawal limits due to its 3AC exposure.

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Who are we? There is a lot happening in our world. Everything has layers, and each layer has to be carefully peeled so you, the reader, know how the world of money is changing every day. That’s our promise. Help you unpeel the onions, which are the public markets in the US, India, and crypto, so that you know just a little more.