Ever wondered what transpired between Binance CEO, Changpeng Zhao, and former FTX CEO, Sam Bankman Fried, over a proposed $40 million futures exchange deal? An extract from Michael Lewis’ publication, “Going Infinite,” gives an insightful account of the episode. It’s a fascinating story of a proposed futures exchange that promised to be a game-changer in the cryptocurrency trading arena.
The Proposed Futures Exchange
According to the book, Sam Bankman Fried, fondly referred to as SBF, proposed a revolutionary idea of a futures exchange in March 2019. His vision was to create a futures exchange that would be insulated from the risk of bad trades with high leverage. A traditional futures exchange allows traders to leverage their funds against minimal collateral. If the trade begins to falter, the exchange usually requests traders to increase their collateral. In the volatile world of crypto trading, however, rapid and substantial price fluctuations can leave exchanges with bad debts due to insufficient collateral.
SBF’s concept aimed to circumvent this issue. His futures exchange would track the trader’s activity and immediately liquidate the user’s positions once the trade surpassed the collateral. This approach would significantly limit any potential losses for the exchange.
Differing Visions
However, the book suggests that Binance and FTX had contrasting objectives at the time of the proposal. FTX was looking to cater to institutional investors, whereas Binance was more focused on retail customers. After considering the proposal for a few weeks, Changpeng Zhao, also known as CZ, decided against funding Sam’s project and instead developed an in-house futures platform. This decision reportedly did not sit well with SBF, leading to some friction between the two CEOs.
FTX’s Independent Journey
Undeterred by the refusal from Binance, FTX proceeded to launch its own futures exchange in 2019. However, the uncertainty of its success was quite palpable. An excerpt from the book quotes SBF saying: “If it works it is worth billions of dollars, but I thought there was a better than fifty per cent chance it wouldn’t work. I’d never done marketing. I’d never talked to the media. I’d never had customers. It was just different from anything that I’d ever done.”
Their paths crossed again in 2021 over a potential acquisition during the FTX liquidity crisis. However, CZ declined the offer, stating that the platform was beyond salvage.
These events underscore the volatile and unpredictable nature of the cryptocurrency market. They also highlight the importance of reliable tools like cryptoview.io that provide comprehensive insights into the crypto market, helping traders make informed decisions.
