Binance CEO Changpeng Zhao shared "two big lessons" he learned from the FTX (CRYPTO: FTT) liquidity crunch, which led to the cryptocurrency exchange spiraling into a crisis.
What Happened: Late on Tuesday, Zhao — better known as CZ among the crypto circles — touched upon the troubles at Binance's rival, saying cryptocurrency firms should not use their own tokens as collateral.
See More: How to Use Binance Smart Chain
“Never use a token you created as collateral,” said CZ. “Don’t borrow if you run a crypto business. Don't use capital 'efficiently'. Have a large reserve.”
CZ added that Binance has never used BNB (CRYPTO: BNB), its native token, as collateral, and "we have never taken on debt."
Earlier this week, Binance said it would liquidate its entire FTT holdings, creating shockwaves in the crypto market.
After the subsequent crash at FTX, Binance said it would acquire Sam Bankman-Fried's company to help tide over a liquidity crunch, creating confusion among investors.
According to Glassnode, on-chain data shows active addresses transacting with FTT have been close to zero throughout 2022. This means most of the addresses were holding FTT with the custodial wallet of FTX.
Price Action: FTT is trading at $4.86, down 71.22% in the last 24 hours, according to data from Benzinga Pro.
Read Next: Bitcoin, Ethereum, Dogecoin Crash: Analyst Says Crypto's 'White Knight' Needing Binance Rescue Causing 'Wave Of Uneasiness'
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