BINANCE ACQUIRES VOYAGER FOR $1 BILLION

Video on YouTube: https://www.youtube.com/watch?v=u1g8Dub2IAM&t=6s

Crypto's largest exchange once again takes all the headlines this week with Binance.US looking set to continue its mission to rescue the market by absorbing crippled crypto giant, Voyager, for a deal worth just over one billion dollars. 

But, as with much of this space lately, are the goals of its increasingly powerful CEO, ChangPeng Zhao, truly that noble? How is this buyout really happening? And what can we expect when this is all over? To answer all these questions and more, stick around until the end of the article as we dive into the latest drama in perhaps the wildest times in crypto finance.

Before we begin, we need to share an important disclaimer. This is not financial advice. Any and all information in this video is purely educational and cannot be considered advice towards any form of investment.

With that out of the way, let us get straight into it. To understand what is going on, you have to understand one simple thing about the state of corporate crypto finance right now, and to it put simply; they all borrow from each other. Unlike conventional financial sectors, the crypto industry is vastly unregulated and, because of that, securing big lenders outside of the space is extremely difficult with many of these blockchain behemoths forced to borrow from one another to continue expanding. And that is also why, even with the enormous scale of its collapse this year, crypto's fall has largely been contained within its own borders - failing to spark a contagion to the rest of the wider market.

But, with such a small group of players to borrow from under the same roof, it is easy to imagine how rapidly one spark can cascade into a closed-off fireball - and this is exactly what has happened, and is continuing to happen, to Voyager. To give a little back story, the company itself operated and behaved much like a bank, but with a massively risky twist. One of its largest money-making machines involved loaning out customer cryptocurrency deposits to big investing firms and hedge funds, like Singaporean company Three Arrows Capital to generate interest.

With the summer collapse of 3AC, Voyager almost instantly found itself over half a billion-dollar short, with its $670 million loan completely wiped out. With such a gigantic gaping hole in their books, a spontaneous panic ensued, with customers, sensing blood in the water, undertaking a frenzied withdrawal from the exchange. And just like normal banks, when customers make such uncontrollable bank runs, there is simply nothing there to actually give them. Just like that, Voyager was brought down to its knees and became yet another crypto domino to fall.

This sets the stage for where we are now. With Voyager up for bankruptcy auction, it was not actually Binance, but FTX U.S. that initially led the race, but, as we all know, with the infamous fraud and drama surrounding FTX and Alameda Research, they too collapsed soon after. It was now left to CZ and Binance to take the reins and save what was left of the Voyager aftermath.

So, how is it going to happen? The deal is set to be structured similarly to how FTX intended to buy it out; with a purchase price of $20 million, which will be used as repayments to its customers, with most of the $1 billion valuation as debts owed to its clients. As with any bankruptcy case, this will only happen once the courts decide how many prorated shares each account will receive - in other words, how much value in cash or equity these shareholders or clients are going to get.

When are we expecting it to happen? Voyager wants this agreement approved by early next year on 5 January 2023, while the actual movement of cash is expected to occur several months later.

But, with as with much of corporate finance, this barely describes the full story - nor does it explain why Binance, as powerful as it is, would risk such a move in such an unprecedented tumultuous time.

See, Voyager itself will only receive $20 million as the purchase agreement. After the deal is complete, Binance will enjoy the freedom to decide how and whether it will try to keep its customers and assets on the Voyager platform. In other words, the billion-dollar figure being thrown around in every headline only explains its valuation through debt and is not exactly an indication of how much it will actually pay for the true grand prize; access to 3.5 million accounts.

So, what could this all mean for you and the crypto industry as a whole? On the positive side, it could be the firm and clear message the market needs; a continuation of CZ's stance that Binance should take a leading role as a safety net to as much of the crypto market as possible, secure its future, and achieve the long-awaited stability we have been craving for after a catastrophic year. On the dark side, it could be yet another move by crypto's largest corporation to further extend its reach; to centralize and monopolize the industry - risking the core Web3 principles of transparency and decentralization we all love.

Only time will tell which scenario plays out, but let us know which one you believe or if there's even more to this deal that we have managed to cover!

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