BNB, issued by the largest exchange by volume, Binance, surged by more than 20% in two hours after Binance CEO. Changpeng Zhao (CZ) announced plans to acquire FTX.
Later, however, the BNB price dropped by more than 20% to its current price of $315.9.
This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire https://t.co/BGtFlCmLXB and help cover the liquidity crunch. We will be conducting a full DD in the coming days.
— CZ 🔶 Binance (@cz_binance) November 8, 2022
The Binance CEO described the current FTX situation as “dynamic” and predicted that FTT would be highly volatile in the coming days. Zhao also affirmed that Binance could withdraw from the deal at any time.
Furthermore, FTX CEO confirmed that full due diligence is expected to be completed in the near future.
2) Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in. It may take a bit to settle etc. — we apologize for that.
— SBF (@SBF_FTX) November 8, 2022
In addition to the increase in BNB value, FTX native token FTT also surged by 40% in a few hours but later fell by more than 75% to its current value of $5.412.
The sequence of events has been uncovered with massive withdrawals of assets from FTX in the last two days after CZ announced Binance would sell its shares in FTT reserves. As a result, FTX treasuries were drying up while Binance’s volume soared as assets flowed to the prominent cryptocurrency exchange. Consequently, some feared FTX would collapse like the Luna debacle and face insolvency.
However, Binance ended up being the first and last investor to acquire FTX. Following that, there were huge speculations that led to massive investments in BNB within a few hours, increasing its market cap from $2.76 billion to $3.68 billion. Thus contributing to its massive price increase.
Currently, BNB is trading at $317.2, up 5.85% in 24 hours.