FTX and Binance: The Winners of the Crypto Winter?

In November 2021, the crypto market cap touched an all-time high of $3 trillion. Amid rising inflation and uncertain geopolitical conditions, cryptocurrencies have lost more than $2 trillion worth of market value within the last eight months. Analysts termed the latest market plunge as one of the worst 'crypto winters' of all time. The crypto mayhem was so intense that it forced some of the leading names like Three Arrows Capital and Celsius to file for bankruptcy. However, there have been some winners as well.

FTX, founded by Sam Bankman-Fried, is one of the biggest winners of the latest crypto winter. With the acquisition of Liquid Group, Good Luck Games, Bitvo and the recent deal with BlockFi, the crypto exchange has turned the $2 trillion crypto rout into a buying opportunity. With billions of dollars in cash, FTX is still on the hunt for further acquisitions. In a discussion with Reuters last month, Bankman-Fried said that the company still has a decent amount of cash to save struggling firms in the crypto ecosystem. FTX reported a whopping 1,000% jump in revenues last year as the number climbed from $89 million in 2020 to over $1 billion in 2021.

Binance, on the other hand, has quietly strengthened its position in the digital asset world during the latest crypto winter. Binance recently overtook Coinbase as the exchange with the largest Bitcoin holdings. While Coinbase laid off approximately 18% of its global workforce, Binance announced the opening of almost 2,000 positions and has expanded its operations significantly in the past few weeks.

“Deep Pockets”

According to Marc P. Bernegger, the Co-Founder of the Crypto Fund AltAlpha Digital, both FTX and Binance have 'very deep pockets' with billions in cash. The Swiss entrepreneur added that the acquisition strategy of FTX and Binance is helping their expansion.

“After the latest massive crypto crash, we see a market consolidation. Established players like Binance and FTX with very deep pockets take advantage of these developments and are actively looking to acquire struggling competitors and expand their product offering,” Bernegger said.

Earlier this year, Binance announced a strategic investment worth $200 million in Forbes.

Robust Ecosystems

Parsa Abbasi, the Co-Founder and CTO at LivelyVerse.io, believes that the native tokens of FTX and Binance are playing a major role in the growth of both companies. He added that FTX and Binance have outperformed US-based crypto trading platforms because regulatory pressure on digital asset companies based outside the US is less compared to the platforms like Coinbase.

“Both FTX and Binance also have very robust ecosystems based on their native tokens, which generally power their blockchain infrastructures. Considering that the digital currency ecosystem focuses on innovative infrastructures in the crypto winter, Coinbase has nothing to bring to the table in terms of Defi, and NFT utility other than its role as a trading platform. As a publicly traded market, Coinbase stock is also notably shorted and has been on a downtrend compared to the mainstream stock market indices,” Abbasi said.

Binance Coin (BNB) currently has a market cap of $42 billion.

Strong Business Models

A wide range of product offerings, well-balanced business models, and acquisition strategies have made it possible for Binance and FTX to accelerate their growth even in a challenging cryptocurrency market.

“Binance hits the top both in strategic business terms and product-wise – needing to mediate its interests with governments and regulations, the company keeps a strong focus on its users and key values of the decentralized crypto world. The incredible story of success is behind Binance. It emerged as a mega crypto market giant with huge capitalization in just five years. The key reasons are wise management and a proper business model, and I am pretty sure that Binance will continue its prominent growth,” Ilman Shazhaev, CEO of Farcana, said.

The success of FTX and Binance is not an overnight story. Both companies developed strong business models along with effective marketing strategies to take advantage of the growing crypto interest across the world. In June 2022, Binance inked a sponsorship deal with Cristiano Ronaldo. Earlier this year, the digital asset exchange announced a collaboration with GRAMMY Awards. In the past few years, Binance and FTX have hired regulatory experts to develop trading products according to regulations in different regions. In April 2022, Binance announced the appointment of Steven McWhirter, a former FCA regulator as the company's Director of Regulatory Policy. The crypto holding strategy of both firms also helped them save a few 'billions' for the rainy days.