CZ of Binance made an announcement regarding its liquidation of $529M worth of $FTT, presumably to protect users and minimize market impact in case of a downside event if the price of $FTT drops and there is a contagion event. In doing so, this makes a bad situation worse. This, and a variety of other Twitter talk, triggered an insolvency scare for $FTT and FTX to be specific. A slew of withdrawal requests came in on FTX from users who are afraid of a repeat situation similar to sometime early in this year’s Terra Luna, Celsius, and Three Arrows Capital crash. The liquidity crunch became more real. Binance “bails out FTX”.
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Binance is the largest cryptocurrency exchange globally, by volume, for years. The biggest exchange in the world just got bigger. In a more mature industry sphere, this would be a good move for the antitrust discussions. But many questions remain unanswered. What are the regulatory guardrails in this situation? Who is in charge, as both Binance and FTX operate in various jurisdictions? In the nutshell we can say that the whole point of crypto and web3 is decentralization. This is a totally centralized move. It shows the nascency of the industry that when push comes to shove, people might still want protection that centralized corporations have the semblance of providing. The consolidation here goes against the principles of the industry.The tokenomics of $FTT and frankly the other associated tokens of entities (e.g. $UST/$LUNA of Terra Luna, $BUSD/$BNB of Binance, etc) power the economics of their respective ecosystems (and a large part of their company’s balance sheets).
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