Binance vs FTX: The Rise and Fall of a Crypto Rivalry

In the world of cryptocurrencies, a tale unfolds. Binance and FTX, once towering giants, offered a plethora of services - spot trading, futures trading, margin trading, lending, staking, and more. Each wielded its native token: BNB for Binance and FTT for FTX. These tokens, like the shifting tides, rode the waves of market volatility. As of October 5, 2023, BNB stood strong in 4th place, commanding a market cap of $39.6 billion, while FTT languished in the 64th spot with a modest $0.8 billion market cap.

Not too long ago, FTX was a juggernaut in the crypto realm. In the heyday of March 2021, its native token, FTT, proudly claimed a spot among the top 10 cryptocurrencies.

However, behind the scenes of these successful platforms, two charismatic and influential leaders emerge: Changpeng Zhao (CZ) and Sam Bankman-Fried (SBF). CZ serves as the founder and CEO of Binance, while SBF holds the same titles for FTX and Alameda Research. Notably, both are billionaires, philanthropists, and visionaries within the cryptocurrency space.

But amidst their success lies a captivating rivalry. In this article, we will delve into the genesis of CZ and SBF's rivalry, scrutinize CZ's alleged role in FTX’s tumultuous downfall in 2022, and critically assess the credibility of CZ's assertion that he remained oblivious to FTX's inner workings.

To begin with, CZ and SBF were once allies, collaborating on numerous initiatives and sharing a common vision for the cryptocurrency industry. Their partnership was marked by mutual respect and admiration.

In March 2019, a significant event occurred in the relationship between Binance and FTX. SBF extended a lucrative $40 million proposal to CZ, suggesting a joint venture to launch a futures exchange for Binance with zero risk. This proposal was detailed in Michael Lewis’ book ‘Going Infinite’, which envisioned a partnership where FTX would provide the technology and liquidity for the futures exchange, while Binance would contribute its brand and user base. SBF argued that this alliance would yield mutual profits and market dominance.

However, CZ declined the offer, citing distinct ambitions for Binance compared to SBF’s vision for FTX. CZ was determined to cater primarily to retail customers, whereas SBF aimed to allure institutional investors. Moreover, CZ was keen on developing an in-house futures platform rather than relying on FTX’s technology. Strikingly, he made no reference to regulatory or ethical concerns in his decision.

Despite this setback, the relationship between the two companies continued. In December 2019, Binance made a strategic investment in FTX as part of their endeavor to foster the cryptocurrency ecosystem. In addition to this, Binance secured a long-term position in FTT, FTX’s native token, with the aim of bolstering the growth of FTX’s platform.

However, diverging goals and strategies for their respective exchanges led to a gradual estrangement between Binance and FTX in 2020 and 2021. While Binance retained its status as the largest crypto exchange by trading volume and continued to offer a diverse range of futures products, FTX potentially missed out on the opportunity to leverage Binance’s network and reputation to attract a larger user and investor base.

The climax of their rivalry unfurled in early 2022 when FTX encountered a catastrophic crisis following a report by CoinDesk that cast doubts on FTX's association with Alameda Research. This report alleged that FTX manipulated its own markets by deploying Alameda Research's trading bots to inflate volumes and prices. Furthermore, it accused FTX of partaking in practices such as insider trading, wash trading, front running, and other illicit activities.

As a consequence, the report triggered a substantial sell-off of FTT tokens, resulting in an over 80% plunge in value within a matter of days. Regulators worldwide initiated investigations into FTX, accusing the exchange of fraud and market manipulation. Although FTX vehemently denied these allegations, the damage to its reputation and business had already been inflicted.

Yet, the lingering question remained - did CZ play a role in FTX's dramatic downfall? Several sources, including CNN Business' article titled 'The Crypto Kingmaker' and Investopedia's 'The Fall of FTX,' contend that CZ played a pivotal role in exposing FTX's alleged misdeeds and undermining its operations.

Firstly, CZ's decision to liquidate his entire holdings of FTT tokens prior to the report's publication raised suspicions that he might have possessed prior knowledge of its contents or implications. Secondly, CZ explored the possibility of acquiring FTX's business at a discounted rate after its collapse but ultimately withdrew from the deal, citing excessive risks and costs.

However, in the aftermath of FTX's collapse, CZ staunchly maintained that he had no involvement in FTX's operations or financial affairs. He asserted that he was merely an investor who divested his stake for profit, emphasizing his lack of responsibility for FTX's demise.

Nonetheless, CZ's assertions have drawn skepticism from some quarters, prompting questions about his credibility and consistency. To begin with, Binance's prior status as an investor in FTX until 2021 implies access to FTX's data and records, making it implausible that CZ was oblivious to FTX's activities and performance.

Furthermore, considering that Binance and FTX were competitors in the cryptocurrency market, especially in the futures sector, speculations arise about CZ's potential motive to undermine FTX's growth and reputation.

Finally, Binance emerged as a beneficiary of FTX's downfall, gaining more market share and users in the wake of FTX's collapse, which naturally raises questions about CZ's possible incentive to capitalize on FTX's misfortune.

To sum it up, the CZ and SBF narrative within the cryptocurrency sphere unfolds as an enthralling saga—from their initial partnership to their eventual rivalry. The tantalizing allegations surrounding CZ's role in FTX's rollercoaster journey in 2022 leave us pondering unanswered questions. Nonetheless, in the ever-evolving cryptocurrency landscape, separating verifiable truths from speculative conjectures remains a perplexing endeavor in this riveting narrative.