What is the reason for the fierce confrontation between Binance and FTX? Will FTX collapse?

As CoinDesk exposed Alameda’s financial data, although this matter had nothing to do with Binance, Binance’s attacks never stopped.

Binance co-founder He Yi commented on the incident: “Binance does not provide unsecured loans, does not participate in transactions, does not blindly buy companies, does not spend money on sponsorships, and 20% of FTX’s equity has been sold. We should keep our heads up in life and our heads down in work.” Especially the first sentence, implying that FTX provided a large amount of unsecured loans to Alameda.

On November 6, it was reported that Binance address 0xd9…d7d7 transferred 23 million FTT (worth about $580 million) to FTX address 0x04…8379 for sale. According to Wu's further on-chain verification, address 0xd9…d7d7 may be the payment address for Binance's investment in FTT to obtain linear unlocking, and address 0x04…8379 also belongs to Binance, as a transfer to transfer FTT to Binance's official wallet. Perhaps because all FTT shares have been unlocked, Binance transferred all FTT to the official wallet at once.

On the evening of November 6, Alameda CEO Caroline responded that the specific (CoinDesk disclosed) balance sheet is for a subset of our company entities, and we have more than $10 billion in assets that are not reflected there; given the tightening of the crypto credit space this year, we have now repaid most of the loans; we obviously have unlisted hedges. However, Caroline's simple reply did not respond to the related transactions and capital exchanges with FTX, and it is difficult to completely dispel external doubts.

Just when everyone thought that the turmoil would come to an end, who knew that Binance founder Zhao Changpeng suddenly stepped out in person and dropped a bomb.

(Picture from the community)

CZ suddenly said that Binance received about $2.1 billion worth of BUSD and FTT last year for exiting a portion of FTX's equity. Due to the recent revelations, Binance decided to liquidate any remaining FTT on its books. Binance will try to liquidate in a way that minimizes market impact, which is expected to take several months to complete due to market conditions and limited liquidity. FTT then plummeted. Caroline responded temporarily that if you want to minimize the impact of FTT sales on the market, Alameda is happy to buy it from you today at $22.

SBF, who has been silent on the Alameda incident, also had to speak out. He said that he has great respect for everything you have done to build the industry we see today, whether they return or not, and whether we use the same methods. Including CZ. In any case - as always - it's time to build. Make love (and blockchain), not war.

CZ's response was very direct: Liquidating our FTT is just risk management after exiting, learn from LUNA. We supported it before, but we won't pretend to make love after the divorce. We are not against anyone. But we will not support those who lobby against other industry participants behind the scenes (here alludes to SBF's previous suggestion to strengthen the blacklist management of the crypto industry and DeFi front-end KYC, which caused controversy).

SBF then responded again: A bunch of unfounded rumors have been circulating. FTX's finances are audited, and while it sometimes slows us down on our products, we are highly regulated and we have processed billions of dollars in deposits/withdrawals today. (Suggesting that there were a lot of withdrawals after the rumors appeared, but deposits and withdrawals are normal) There are also a lot of USD <> stablecoin conversions going on. In the end you should do what you want and trade where you want. We thank those who stay; when this is all over, we will welcome others back.

On the morning of November 6, research by The Data Nerd showed that Alameda Research received 56 million USDC from Circle and then transferred it to FTX. In the past 24 hours, they have sent $257 million to FTX. At the same time, FTX's stablecoin outflow was the largest outflow of all exchanges in the past 7 days. Net outflow of $292 million. According to Nansen, in the past 7 days, Binance has inflowed $337 million, making it the largest entity for stablecoin inflows, and its current balance is $26.6 billion.

SBF's restraint seems to have made it impossible to continue the "quarrel", and the matter seems to have come to a temporary end. What is the reason for the fierce confrontation? We think there are three angles: the feud between Binance and FTX; FTX has recently made Binance feel challenged; Binance has always been highly vigilant against its competitors.

1. Binance was once an investor in FTX, and this investment has become one of Binance's most profitable investments. But it is obvious that Binance's investment does not care about returns, and its essence is strategic investment. The investment object has become the biggest competitor, and CZ must be very angry. Previously, Binance announced its withdrawal from this investment. Although it is not known what happened behind the scenes, the relationship between the two parties has indeed taken a sharp turn for the worse.

2. FTX and Binance are both competing in the rescue and acquisition of non-performing assets such as Celsius Blockfi Voyager. They have a huge number of American users and licenses, which are undoubtedly assets that both sides are competing for. FTX has won a comprehensive victory. This seems to be related to their good relationship in the United States. In contrast, Binance's previous US CEO resigned and broke the news and attacked Binance everywhere, criticizing Binance for being a Chinese company. CZ also had to issue a long response to explain that he is Canadian. As one rises and the other falls, in recent investments in some large projects such as Atpos, FTX is the lead investor, while Binance Labs can only follow the investment, which once again shows FTX's dominant position in the US currency circle.

3. Binance’s DNA has always been very vigilant towards competitors. Not long after the cryptocurrency influencer Liang Xi sang in unison with Justin Sun, Binance paid $150,000 for it, which shows that it has no airs of being the world’s largest exchange. In the face of FTX’s tendency to surpass the global ecosystem, it is indeed a routine operation to suppress it from all possible aspects.

Finally, for ordinary users, what they are more concerned about may be the future trend of FTX and FTT. In other words, is FTX risky? We provide a few of our own observations, which do not represent investment advice. Due to the serious lack of transparency of the data, this judgment is likely to be wrong.

1. FTX’s funds do not seem to have any major problems for the time being. (Although CEX is a black box, we can only judge from some superficial actions, such as quick compensation for previous victims of cross-trading; a large number of lead investments, acquisitions, political donations, etc., FTX is still spending a lot of money)

2. Alameda and FTX’s complex related transactions must exist, which is also the reason why Binance attacked and SBF dared not respond. The procedure is one thing, and the result is another. As some professionals have analyzed, unlike 3AC, which was superstitious about Bitcoin supercircle and bet on the direction, leading to its collapse, SBF and Alameda’s ruthless style (famous for selling off their own investment project tokens) and their tendency to short and bearish, do not seem to be another 3AC so far.

3. What is the problem with FTX? If multiple negative factors intersect and occur simultaneously in the future (such as hacker attacks as a fuse), its ability to resist risks will indeed be relatively weak. In addition, the opacity of the relationship between FTX and Alameda will also cause user concerns. The huge contrast between Three Arrows Capital before and after has caused everyone to have a high degree of distrust in centralized institutions, which also led to a large number of withdrawals this time (Binance will definitely not be absent from future attacks).

It is hoped that SBF can use this incident to demonstrate more transparency, such as regularly disclosing FTX and Alameda audit reports or partial audit content (for example, who is the auditing agency? Learn from Tether), to give the public more confidence and even turn the tables on Binance.