Binance Plans to Acquire Rival FTX as Crypto Industry Struggles

Crypto giant Binance has signed a non-binding agreement to buy its major rival, US-based FTX.com. The latter-mentioned cryptocurrency exchange had been undergoing a dangerous liquidity crunch that placed its clients’ funds at risk.

Binance, the world's largest crypto exchange, is conducting a due-diligence process on the acquisition ahead of what will become the latest in a series of high-profile rescue acts in the beleaguered sector.

Cryptocurrencies have been rocked this year as investors pulled out from risky instruments. High inflation around the globe has caused central banks to hike interest rates, sending investors seeking safe havens, like the US dollar, and away from crypto. This year alone, the cryptocurrency market has fallen by about two-thirds from its peak – to $1.07 trillion.

The surprise transaction between two sworn enemies has raised new concerns about the risks investors face in the volatile crypto exchange market.

The move should provide relief to FTX consumers in the short-term, but creates questions going forward. FTX had seen about $6 billion of withdrawals in the three days before the announcement this week, an unusually high level that caused it to suspend withdrawals temporarily.

Bitcoin, the biggest digital token, and a bellwether for the whole industry, was down by 11% on the news. Liquidity crunch issues continue to haunt the crypto market, giving investors legitimate concerns about the security of their digital assets.