A fight between two of crypto’s largest figures just broke out after the CEO of Binance Changpeng Zhao (CZ) called out another billionaire exchange founder, Sam Bankman Fried (SBF), the CEO of FTX, for getting too cosy with the regulators.
Binance vs FTX: The Fight
Both of the billionaires are well-known in the crypto community by their respective acronyms: Changpeng Zhao is ‘CZ’ and Sam Bankman Fried is ‘SBF’. CZ is heavily focused on delivering broadscale adoption of cryptocurrency to the mass-market and is a widely-respected leader in the crypto space.
While SBF holds similar ideals, he’s historically been more preoccupied with creating wealth so that he can “give it away”, aligning himself with a philosophical movement known as ‘Effective Altruism’.
This morning, Chinese-Canadian CZ revealed that Binance would be selling US$584 million worth of the FTT token due to growing concerns around SBF cosying up with regulators and with the financial stability of FTX in general.
At the beginning of this month, SBF was put on the spot by prominent crypto personality Erik Voerhees for holding contradictory views on regulation. In the debate he called out SBF for cosying up to regulators that favour FTX at the behest of other major crypto firms.
What makes this conflict between CZ and SBF significant is that it is essentially signalling the beginning of conflict between two of the largest cryptocurrency exchanges in existence today. This could send shockwaves through the crypto market, with each exchange holding sway over major sectors in the crypto economy.
Why is Binance Selling FTX Tokens?
While it’s hard to define the exact reasoning behind why Binance is dumping nearly half a billion dollars worth of FTX tokens, CZ has made it extremely clear that he sees FTX as a financial risk to the operations of Binance moving forward.
For context, the 30-year-old billionaire Sam Bankman-Fried has two major crypto ventures. One is the crypto exchange FTX and the other is hedge fund Alameda Research. According to a recent report from CoinDesk, Alameda Research has an enormous exposure to the FTX exchange’s native token, FTT.
The FTT token is an ‘exchange token’ much like Binance’s BNB token. FTT provides FTX users with discounts and referral commissions. Its price is fundamentally supported by the amount of trading that happens on FTX, with the exchange saying that it uses 33% of its revenue from trading fees to buy back the FTT tokens.
The CoinDesk report claimed that Alameda held a total of US$14.6 billion in crypto assets, with FTT token accounting for more than US$3.66 billion of that total. This amount accounts for more than half of the total US$5.1 billion in circulation, an unusually high exposure for an internal organisation to have to its own token.
Joining the fight, Alameda’s CEO Caroline Ellison quickly took to Twitter in an attempt to debunk the rumours. She claimed that the balance sheet surfaced by CoinDesk wasn’t an accurate reflection of the hedge fund’s total holdings. “That specific balance sheet is for a subset of our corporate entities, we have more than US$10b of assets that aren’t reflected there,” she wrote.
This did little to appease commentators, some of which were quick to point out that a highly centralised ownership suggests that FTX may be manipulating the price of the FTT token. In the past other crypto platforms like the now-bankrupt Celsius Network were discovered to be running a similar strategy that worked to manipulate the price of its native token, CEL.
How will the battle of the billionaires affect crypto?
Looking at who stands to come out on top in this battle of the blockchain, Binance — the world’s largest exchange by daily trading volume — currently holds the high ground. According to recent research from The Block more than half of all of the daily buying and selling of crypto occurs on the Binance exchange, which puts Binance ahead of all other crypto exchanges by a massive margin.
Contrastingly, FTX and FTX US (a separate United States focused arm of FTX) accounts for just 5.1% of all daily trade, putting it just behind Coinbase in 5th place globally. While this chart doesn’t account for the more speculative products like futures and options, it provides solid insight into who controls the bulk of all transactions. This is important because exchanges make their revenue from charging trading fees on each transaction. The exchange that facilitates the most transactions stands to make the most revenue from those fees.
Overall, Binance moving to completely remove the FTT token from its books altogether could spell bad news for the future of FTX. It means that the largest player in the crypto market is fundamentally opposed to the way that SBF does business in the space and doesn’t want any links to the potentially weakening finances of the FTX exchange.
At the time of writing the FTX’s exchange token FTT has dropped more than 10% due to the overall negative sentiment towards the exchange.
What happens next?
The fight rumbles on. Right now, both of the billionaires are trying their best to downplay the conflict on social media. CZ added that Binance will sell the FTT tokens slowly to minimise the impact on the overall crypto market and that this move isn’t “trying to hurt” FTX.
Likewise, SBF said that he ultimately “respects the hell out of CZ” and that founders and CEOs should work to “make love, not war” moving forward. The fight may continue in private, however.
Still, the move from CZ has Crypto Twitter in an uproar, with many brilliant memes around the scenario hitting the timeline.