The war between FTX and Binance has escalated, from shoulder-to-shoulder to tit-for-tat

Original title: "CZ and SBF fight each other, how Binance and FTX broke up from allies to passers-by"

Original source: Web3 World

Original author: Julian

On August 25th, the encrypted KOL "FATMAN", who is known for exposing various black materials, posted on social media “It has been verified that M Group Communications, FTX’s public relations firm, has signed on to publish negative media articles about its rival trading platform Binance. Hired journalists have access to ‘anti-Binance contacts’ and even related ‘black papers’,” the post said. "References for research. ”

In this regard, M Group Strategic Communications clarified that the information in FATMAN’s tweet is not true. As a PR firm for some of the largest and most influential businesses in the digital asset space, its mission is to give clients exposure to the great work they are doing within the ecosystem. The company has always adhered to the highest ethical standards and will never cooperate with the media to publish negative stories or articles about any industry, any business.

Binance and FTX two former partners officially announced on July 21, 2021 Parted ways. Binance founder Changpeng Zhao (CZ) said on the same day that the company recently gave up its stake in FTX. CZ explained the divestment as part of a "normal investment cycle" and said it was done on good terms. But obviously Binance's investment cycle is not as "normal" as CZ said. On the same day, FTX announced the completion of its $900 million Series B round of financing at a valuation of $18 billion. Since then, FTX has started a "celebration" frenzy of financing. Global, Temasek, Softbank and other top capital support. Then started FTX's own hyper-speed development and territory expansion.

For the details of their relationship from good to bad, please read below.

On July 7 this year, the encryption community was surprised to find that the founder of the encryption trading platform Binance Changpeng Zhao (CZ) and FTX founder Sam Bankman-Fried (SBF) actually mocked each other on Twitter. The direct cause was that CZ tweeted to ridicule SBF and questioned that FTX might be out of money. CZ said that 3AC owed Voyager hundreds of millions of dollars and caused Voyager to go bankrupt. (FTX's) Alameda invested in Voyager and borrowed 377 million dollars from Voyager. Why did FTX not pay back the money to rescue the bankrupt Voyager, but invalidly gave 3AC 1 Billion dollar bailout?

As for the questioning, SBF ridiculed that CZ pretended to be in the rescue industry and did not understand the legal knowledge related to bankruptcy.

Why did the founders of the world's two largest encryption trading platforms mock each other on Twitter? Why did Binance, which once made a strategic investment in FTX, start to get angry? In fact, the relationship between Binance and FTX is very subtle, and its changes can be roughly divided into three stages:

1. The ally period of strategic cooperation

2. The breakup period when we are still friends

3. The friction period when two tigers compete

This article will analyze the relationship between Binance and FTX according to these three stages. Why did it change from an ally to a friend to a conflict? What is the source of the conflict between Binance and FTX?

Alliance period: FTX market value increased 180 times in 2 years

FTX was launched in the second quarter of 2019. When it was established, the equity value of the FTX team was valued at 100 million US dollars, and the platform currency was valued at 100 million US dollars. On December 20, 2019, Binance announced that it had made a strategic investment in FTX. In other words, FTX’s valuation reached US$1 billion within half a year of its launch.

Binance stated that in addition to the equity investment in FTX, Binance also holds FTXToken (FTT ), to help the sustainable development of the FTX ecosystem and keep pace with the development of the Binance ecosystem.

At that time, the derivatives market was firmly dominated by BitMex and OKEx. Binance, which started out as altcoin spot, has just launched contract business. Binance hopes to increase its ecological layout by investing in FTX and help Binance to catch up in the derivatives market. The two sides also spent a harmonious honeymoon period at this time.

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FTX has also lived up to Binance’s expectations and shines in derivatives products and innovations. Under the user experience of extremely low handling fees, FTX has launched profitable products centered on spot, contracts, and leveraged tokens.

At the same time, FTX launched Move volatility products, alternative vix (volatility index) products, Attract users in the circle by mapping traditional financial products; at the same time, launch equity certificates, pre ipo products, and predictive market products to attract users outside the circle.

Most of the founders of Huobi, OKEx, Binance, etc. are Chinese trading platforms with technical backgrounds Different, the founder of FTX and most of the team members are Trader traders (SBF can't even write code).

The active and passive market-making and trading capabilities of the FTX team can be described as dimensionality reduction in the currency circle at that time At that time, only a few teams such as BitMex had this professional Trader ability and background. This also supports FTX's financial product design, contract market liquidity cold start, platform currency and market value management project trading, OTC market making and other core businesses. It is the cornerstone and origin of FTX's success, and ushered in the second break out.

By December 2020, SBF revealed that the latest valuation of FTX has reached $3.5 billion , FTX's profit will reach 70 million US dollars that year. In less than one and a half years since its establishment, its valuation has risen from US$100 million to US$3.5 billion.

In July 2021, FTX completed its $900 million B round with $18 billion Financing, FTX was established about 2 years ago, and its valuation rose from 100 million US dollars to 18 billion US dollars. And CZ also stated at that time that Binance had completely withdrawn from FTX's equity investment, "The exit is part of the normal investment cycle and was done under good conditions. We are still friends."

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Based on Binance’s investment of US$18 billion at a valuation of US$1 billion and its exit at a valuation of US$18 billion, the return on Binance’s investment in FTX has reached ten times. This also confirms to a certain extent that Binance made about $1.6 billion in investing in FTX.

Breakup period: we will still be friends in the future

The breakup period between Binance and FTX, strictly speaking, cannot be counted according to the official announcement by both parties in July 2021. Before that, there were subtle changes and gaps. The reason for the change is that the business expansion of both parties has produced direct competition.

On the one hand, Binance started "blitz expansion" "Become a behemoth that integrates spot (mainstream + counterfeit), Trade market making, derivatives (positive and negative perpetual/delivery contracts + leveraged Token + options), legal currency OTC, and ecological business (public chain + investment projects, etc.).

On the other hand, FTX also relies on its professional Trade market making ability to make huge profits, and It has gradually surpassed the BitMEX trading platform in the derivatives business, and is also at the forefront in the spot and OTC business. In terms of ecological business, it has a heavy position in the leading public chain Solana and has extensively deployed multiple leading DeFi projects, becoming second only to Binance across CeFi - The top trading platform for DeFi.

Although there is no direct conflict between Binance and FTX during the period around July 2021, The businesses of the two parties have already highly overlapped and directly competed.

In the second quarter of 2019, FTX was established as a derivatives trading platform; in the third quarter of 2019, the Binance contract was launched, and since then it has launched pros and cons perpetual/delivery contracts, options and other businesses . FTX (formerly known as Alameda) started as a USD OTC, and FTX has always been one of the largest offshore USD and Hong Kong dollar OTC deposit channels.

In October 2019, Binance also launched OTC business, although covering 170 countries and regions around the world, However, its main business is still RMB and offshore USD OTC deposits.

In August 2019, FTX took the lead in launching leveraged tokens, and Binance also launched leveraged tokens a few months later Token.

In April 2020, Binance announced the acquisition of the cryptocurrency data website CoinMarketCap for US$400 million; In September, FTX announced the acquisition of Blockfolio, an encrypted asset management tool, for USD 150 million in cash.

In September 2020, Binance announced the launch of the BSC public chain, and the highest rise in BNB over the past year More than 30 times. In January 2021, FTX and its allies completed the off-site acquisition of nearly 80% of the total SOLToken from most of Solana's SAFT investors, employees, service providers, communities, and foundations at a price dozens of times the private placement price. As the owner of the public chain Solana, SOL continued to rise by more than 120 times in the following year.

In July 2021, Binance and FTX ended their investment relationship and began to gradually enter a period of competition and friction.

Changing passers-by: the period of friction between two tigers

The friction between Binance and FTX on the one hand comes from the conflict of the market share of core businesses such as spot and derivatives; on the other hand It comes from the competition between the two parties for the ecological layout since the outbreak of DeFi Summer in 2020; but the higher dimension comes from the strategic and cultural competition between the two.

Obviously, the gene of Trader origin determines that SBF has a strong style of opening the situation by trading , a high degree of risk preference. Some commentators believe that FTX is more like a large 3AC, operating funds with high leverage all the year round, and will make strategic choices with high risks.

Binance dared to compete and expand in a non-compliant and casino way instead of increasing leverage. This is also the business logic of most Chinese encryption projects.

The perfect character with high-tech and no evil is the representative figure of the American dream of digital currency. For example, in the face of the continuous private equity selling pressure and anxious market in the initial stage of SOL and FTT, SBF chose to take back all the chips with an almost gambling stud mentality, and always maintained a high degree of control, and finally formed a long-term stable upward trend independent of the market. When all investors make money, the price will be made higher. It is precisely because all early investors have made money that SBF’s flaunted “altruistic” persona still stands today.

CZ is a typical entrepreneur + geek dual personality, with the courage to think and do The shrewd and courageous Chinese is a super upstart rich man who has risen from the encrypted world. For example, in the early stage of BNB issuance, Binance carried out a lengthy reshuffle of the early private placement chips, and BNB once broke. Many early investors and users were washed out, and Binance even had disputes with some early investors such as Red Shirt Capital, and recovered some of the chips of early investors. Later, Binance revised the white paper, and BNB burning was changed from secondary market repurchase to team repurchase. Later, the market value of BNB entered the top ten, but the early Binance and CZ have always left an overly shrewd impression of lack of contract spirit.

< p>Binance and FTX, as the No. 1 and No. 2 in the industry, have launched an all-round competition in terms of business, ecology and even cultural strategies. However, with the development of the encryption industry to this day, both Binance and FTX have developed into a "too big to fail" trend, and CZ and SBF have also become very important leaders in the encryption industry. But no matter how you quarrel, there are only eternal interests. We believe that the encryption industry will continue to move forward driven by the common interests of all parties.

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