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Leading cryptocurrency exchange Binance has signed a Letter of Intent to acquire rival exchange FTX following revelations that the latter is in financial dire straits.

On Tuesday (8 November), Binance CEO Changpeng Zhao, known as ‘CZ’, tweeted: “This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding [letter of intent], intending to fully acquire FTX.com.”

“We will be conducting a full [due diligence] in the coming days,” CZ added.

In turn, FTX CEO Sam Bankman-Fried (known as ‘SBF’) confirmed what CZ had said regarding the acquisition, telling his followers that: “Things have come full circle, and FTX’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for FTX.com (pending DD etc.).”

In an ensuing thread of tweets, SBF explained that FTX staff are currently working on clearing a withdrawal backlog within the exchange – caused by a slew of traders trying to withdraw funds without the business having the requisite liquidity to process their requests.

SBF offered “huge” thanks to CZ, Binance, and supporters of FTX, calling the acquisition “a user-centric development that benefits the entire industry. 

FTX CEO Sam Bankman-Fried: “Binance has shown time and again that they are committed to a more decentralised global economy while working to improve industry relations with regulators. We are in the best of hands.”

“CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world,” he added.

Previously, there had been several rumours about a fierce rivalry between Binance and FTX, but SBF attempted to put an end to that idea by lauding the acquiring company’s vision.

“Binance has shown time and again that they are committed to a more decentralised global economy while working to improve industry relations with regulators. We are in the best of hands,” he said.

SBF also clarified in another tweet that the deal does not affect FTX’s American business, FTX US, which is a separate company.

The move has generated a veritable furore across Twitter, home to a large and highly critical community of cryptocurrency purists and traders.

Many took to the social network to give their two cents on the acquisition, with several alleging that CZ and Binance had intentionally tanked FTX’s proprietary cryptocurrency, the FTX Token (FTT).

The upcoming deal is the latest in a string of upsets in the cryptocurrency world, which is currently experiencing a severe bear market.

Bitcoin (BTC) is currently trading at $17,660, its lowest price since around November 2020, and a far cry from its highest ever valuation at over $65,000 in November 2021.

In related news, another cryptocurrency exchange, Coinbase, recently revealed that revenue was down more than 50% year-on-year to $576m in Q3. In addition, the number of monthly transacting users on the platform was down on a quarter-on-quarter basis, to 8.5 million.

Trading volume on Coinbase in Q3 was down to $159bn which, despite being a mammoth volume of assets changing hands, still represented a 51.4% decrease year-on-year.

Questions now abound for what lays ahead in the world of cryptocurrency. While it is impossible to predict the future with any certainty, experts point to potential upcoming changes in crypto regulation, which may provide additional stability to the market.

Increased buy-in from mainstream companies and institutional investors could have another major impact on the sector, while broader adoption of crypto as a mainstream payment method is expected to bring about more use-cases for everyday users.

In the meantime, however, it appears that the near collapse of FTX has had a major negative impact on investor and consumer confidence, driving crypto hoarders to sell off their holdings in droves.