Hours after Binance announced that its plans of acquiring rival cryptocurrency exchange FTX, CEO Changpeng Zhao (or CZ as he is popularly known) shared "two big lessons" on investment.
Taking to Twitter, he wrote, "1: Never use a token you created as collateral."
A token is a virtual currency token or a denomination of a cryptocurrency which represents a tradable asset and allows the holder to use it for investment or economic purposes.
The second piece of advice CZ shared was, "Don’t borrow if you run a crypto business. Don't use capital "efficiently". Have a large reserve."
While he did not mention FTX, the cryptocurrency exchange was facing a significant liquidity crunch which eventually led it to be possibly acquired by Binance.
Clarifying the stand, CZ added, "Binance has never used BNB for collateral, and we have never taken on debt."
BNB or Binance coin is the cryptocurrency issued by Binance exchange and it trades with the BNB symbol.
Read more: Binance to acquire FTX: A timeline of events in the crypto deal
CZ's advice resonated with several Twitter users. Some of them added to the list while other's adapted it to suit their investment needs.
Founded by SBF three years ago, FTX had become one of the biggest cryptocurrency exchanges in the world. Its revenue soared more than 1,000 per cent in 2021 to $1.02 billion from $89 million in the previous year, a CNBC report stated.
But on November 7, reserves for FTX stablecoins hit their lowest level in a year as panic spreads and everyone starts withdrawing funds.
FTX founder and CEO Samuel Bankman-Fried had tried to calm the markets by telling investors that their money is safe and on November 8, after announcing the arrangement with Binance, he tweeted, "But the important thing is that customers are protected."
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
