- The price of FTT has crashed by more than 20% in the last 24 hours amid controversy surrounding FTX and Alameda Research
- The market’s confidence in FTT has been weakened even further by Binance announcing that it will sell all its FTT holdings
- The FTX exchange has seen a surge in withdrawals, but appears to be processing them successfully
FTT price drops to its lowest levels since February 2021
Yesterday, FTT tested the $22 price level multiple times. When this support level gave out earlier today, the FTX Token price quickly tumbled, hitting a local low of around $15.7. The reason why the $22 support level was so significant is that Caroline Ellison, the CEO of Alameda Research, made a public offer on November 6 to buy all of the FTT owned by Binance for $22 each. Of course, the offer was made when the market rate for FTT was higher than $22.
The FTT price is now at its lowest levels since February 2021. The price crash has brought the FTT market cap down to $2.30 billion, with the token dropping to 29th place in the market cap rankings.
FTX and Alameda Research are under heavy scrutiny
The uncertainty regarding FTT stems from rumors about Alameda Research, a trading firm that’s closely affiliated to the FTX exchange. A report from CoinDesk published on November 2 cited a private document that purportedly showed Alameda’s balance sheet as of June 30 this year. According to the report, the balance sheet showed $14.6 billion in assets and $8 billion in liabilities.
While this isn’t controversial by itself, the makeup of the company’s assets raised eyebrows. According to the report, Alameda’s biggest asset is $3.66 billion worth of FTT tokens. Alameda also lists $3.37 billion of “crypto held” on its balance sheet, as well as $292 million worth of unlocked SOL and $863 million worth of locked SOL tokens. The firm also has holdings in Solana-based tokens SRM, MAPS, OXY and FIDA. The latter three have especially low liquidity, and it’s unlikely Alameda would be able to get significant value out of these holdings without crashing prices.
The report doesn’t provide further details about Alameda’s crypto asset balances, and notes that the cited document might not represent the entirety of Alameda’s balance sheet. Caroline Ellison has stated that the balance sheet information from the report only covers a subset of the company’s corporate entities. Per Ellison, Alameda Research has more than $10 billion in assets that aren’t reflected on the documents that served as the basis for the report.
– the balance sheet breaks out a few of our biggest long positions; we obviously have hedges that aren’t listed
– given the tightening in the crypto credit space this year we’ve returned most of our loans by now
— Caroline (@carolinecapital) November 6, 2022
Regardless, the information was enough to spook some market participants, and led to increasing rumors about potential solvency issues at Alameda Research and potentially even FTX—the fact that FTT was Alameda’s largest crypto asset holding showed that Alameda Research and FTX were more closely interconnected than some expected.
The Binance vs. FTX rivalry heated up when CZ said Binance would be selling all its FTT
FTX is one of the strongest competitors to Binance, the exchange that’s currently dominating both the cryptocurrency spot and derivatives markets. FTX CEO Sam Bankman-Fried and Binance CEO Changpeng “CZ” Zhao have been publicly exchanging passive-aggressive jabs, despite Binance once being an investor in FTX.
The situation took a turn for the worse for FTT when Binance’s CEO said that the company would be selling off the entirety of its FTT holdings, with the process likely taking several months. This further shook the market’s confidence in FTT. Binance received the FTT tokens it owns when it sold its equity in the FTX exchange. CZ called the decision to sell Binance’s FTT holdings “post-exit risk management”, and said that the decision was informed by what the company learned from the collapse of LUNA.
Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won’t pretend to make love after divorce. We are not against anyone. But we won’t support people who lobby against other industry players behind their backs. Onwards.
— CZ ? Binance (@cz_binance) November 6, 2022
The uncertainties and rumors surround FTX and Alameda Research have led to a flood of withdrawals from the FTX exchange. This is not too surprising given the events that happened earlier this year—the collapse of the Terra ecosystem, as well as the bankruptcies of crypto lending firms like Celsius and Voyager, have made many crypto investors exercise more caution about where they store their funds.
FTX CEO Sam Bankman-Fried has stated that “a competitor” is going after the business with false rumors, adding that both FTX and its assets are “fine”. In addition, Bankman-Fried said that FTX is capable of covering all client holdings, and clarified that the exchange doesn’t invest client assets in any way. Bankman-Fried also said that FTX has GAAP audits and holds more than $1 billion in excess cash.
1) A competitor is trying to go after us with false rumors.
FTX is fine. Assets are fine.
— SBF (@SBF_FTX) November 7, 2022
Despite some delays caused by the surge in demand from withdrawals, FTX appears to be processing withdrawals successfully. According to a tweet from the official FTX account, the queue for withdrawals is decreasing and is approaching “more reasonable levels”.
If the concerns surrounding FTX and Alameda Research turn out to be blown out of proportion, it will still be interesting to see in the weeks and months ahead if FTX takes a lasting hit to its market share due to the controversy.