FTX Token: Another One Bites The Dust

Seeking Alpha2022-11-09

SummaryThere was a war going on between crypto heavyweights Sam Bankman-Fried of Alameda Research/FTX and Changpeng Zhao of Binance.The main battleground for that war was FTT, the exchange token of ...

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Sherwin Mah
2022-11-09
Sherwin Mah
Lol tiger brokers invested in them too, what a day. Such sad news. Should we ever be concern with our stocks here at tiger ? If touch wood TB goes outta business/bankrupts, will we still own our shares ?
Tiongwee
2022-11-09
Tiongwee
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As a result, there is a letter of intent to buy what remains of FTX by Binance.While the future of FTX (and the accounts on the platform) appears to be up to Binance, the rest of the crypto market is selling off.IgorIgorevich/iStock Editorial via Getty ImagesWhat had been a generally quiet few weeks in the cryptocurrency market from a pricing standpoint has become incredibly volatile over the last couple of days. And there has been no shortage of intrigue behind the scenes. Up until late Tuesday morning, therewas seemingly a war going on between two crypto heavyweights. While that war appears to be closer to a conclusion, there is still quite a bit up in the air and there has been quite a bit of damage inflicted elsewhere in the crypto market as a result of what just transpired over the last 24 to 48 hours. It apparently ends with centralized finance exchange Binance (BNB-USD) buying centralized exchange competitor FTX.Through a telegraphed liquidation of about $600 million in FTX Token (FTT-USD), Binance founder and CEO Changpeng Zhao (also known as \"CZ\") put a tremendous amount of financial pressure on Sam Bankman-Fried (also known as \"SBF\") of both Alameda Research and FTX. The move came after what was reportedlya leakof Alameda Research's balance sheet just a few days ago and a few weeks after SBF proposed a crypto regulation framework that was widely criticized by influential crypto industry voices. As it turned out, when FTX was in trouble, it was none other than Binance waiting with the remedy.In this article we'll explore the FTT token and why it was significant piece to what CZ just pulled off. We'll look at some of the on-chain data that showed trouble was brewing at FTX. And we'll do our best to speculate what this could all mean for FTT and the broader crypto community.FTT TokenFTT is the native token of the FTX crypto exchange, founded by SBF. Like other exchange tokens that I've coveredin the past, FTT is a utility token that is designed for usage within the exchange ecosystem that it represents; in this case, as a reward/utility token for users of FTX. 69% of the FTX token was initially distributed to investors with the remaining 31% left for the platform and founders:FTT Token Allocation (Messari)A glance at the current token distribution through Etherscanshows 99% of FTT tokens are held by the top 100 addresses. Even more telling, 93% of FTT is held by just 10 addresses:FTT Token Distribution (Etherscan)By any realistic stretch of the imagination, FTT is a highly centralized token and centralized tokens are generally highly illiquid.How We Got HereWhile Alameda Research and FTX are separate entities, concerns have been raised over the last week because Alameda's leaked balance sheet showed a robust $14.6 billion in assets, nearly $6 billion of which was a combination of locked and unlocked FTT tokens. Alameda's leak also showed a little over $1.1 billion in SOL - the majority of which was categorized as \"locked.\" Additionally, the leak showed $8 billion in liabilities on Alameda's sheet. Alameda Research CEO Caroline Ellison later claimed total assets on the leaked balance sheet were underrepresented by about $10 billion.There are problems here optically speaking because so much of Alameda's net equity is dependent on a token that was created and distributed by Alameda's founder's other business. Any loans that have been collateralized by Alameda or FTX with FTT token theoretically lose their backing and a larger liquidity event becomes more likely if FTT's price gets hit in a meaningful way.How Binance Enters the PictureBinance was an original investor in FTX and received a large portion of FTT tokens after getting an exit from the FTX equity position. According to CZ, Binance received $2.1 billion from the FTX equity exit that was spread out among Binance USD (BUSD-USD) and FTT token though the percentages of each asset were not provided. Given what was witnessed on-chain on Sunday, it is believed that the Binance FTT position was somewhere in the ballpark of $585 million and CZ seemed to confirm when Whale Alert pointed out an enormous FTT deposit to Binance exchange:FTT position (Twitter/CZ)It should be noted that CZ said the $585 million FTT position brought onto Binance is apparently \"part of\" what Binance's full FTT position is; though only Binance knows how much FTT is really under Binance's control at this point. But given a fully diluted market cap in the $8 billion range at the time of CZ's tweet, Binance still maintained a large ability to move the FTT market.There was quite a bit of speculation online that CZ's motivation in liquidating FTT, and by extension exacerbating a potential problem for Alameda Research, was in response to SBF's recent regulatory proposal for the crypto industry. That speculation seemed to have been corroborated by CZ himself on Twitter late Sunday: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.It's important to note that many influential voices in the crypto industry pushed back on SBF's original proposal. The criticism was loud enough that SBF openly reflected on the criticism and dialed back some of his recommendations.FTT Breaks And Binance Steps InShortly following CZ's initial tweet telegraphing Binance's FTT intentions, Caroline Ellison put outa tweetto CZ insinuating Alameda would buy every FTT token Binance was willing to sell for $22. While there was a fight put up to defend $22 over the weekend and into Monday, after some short lived pops and fades FTT broke support early Tuesday morning and the token fell all the way down to $15 in a matter of a few hours. It didn't take long for reports of slow withdrawals to spread and by 11 am, Binance agreed to bail out FTX. CZ via Twitter:This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days.The response to the deal was a large rally across the crypto space though that rally has been very short-lived:FTT Daily (TradingView)As I told BCR subscribers on Monday morning, there wasn't much stopping FTT from falling down to $11 if/when $22 broke as $22 had been support for two years and there was very little price discovery between $11 and $22. Though I was right in thinking the decline to $11 would be swift, even support at $11 has proven to be weak and as of article submission FTT is now under $4.What are the scenarios?The biggest thing that I think all players in the crypto casino need to consider is that Binance can still back out of this deal. Given that the crypto market rally immediately following the news of the Binance letter of intent has been entirely sold off even while equities rally and the dollar declines, it appears as though the crypto market isn't convinced this deal will actually go through.For FTX users, the concern becomes trying to anticipate how much damage could be done to FTX if the exchange's utility token collapse continues. Furthermore, how valuable is FTT if FTX continues to see capital outflow from the exchange?FTX ERC20 Balance (Dune Analytics/21Shares)According to 21Shares, on-chain data shows FTX's ERC20 token balance is down from $2.8 billion on November 1st to $1.7 billion Tuesday morning. That's a large outflow and certainly gives some credence to the idea that FTX is dealing with liquidity problems. The issue for FTT holders is the token is a platform utility token. Without assets on the platform, the token loses purpose.It's easy to find messaging parallels from previous crypto liquidation events. Caroline Ellison's $22 bid harkens back to Do Kwon's now infamous \"steady lads\" tweet shortly before Terra Luna (LUNC-USD) blew up. Celsius (CEL-USD) CEO Alex Mashinsky was still highly active doing interviews and sharing links with claims the company had the reserves necessary to meet obligations right before withdrawals were halted. None of this means FTT will continue to collapse, but I would not be jumping into FTT either from the long side or the short side because it's too risky in my view.We've already seen what can happen when a centralized exchange token gets shorted heavily in a small amount of time in anticipation of a bankruptcy. It happened to Celsius Network's utility token when Celsius halted customer withdrawals. After the CEL token tanked down to 15 cents, it staged a massive short squeeze in spite of the solvency issues on the actual platform.CEL Open Interest (CoinGlass)To this day, CEL is still higher than where it was the day before Celsius Network halted withdrawal of funds even though the company is bankrupt. While this certainly doesn't mean FTT will rally in the same way, I do think CEL can serve as a warning of the dangers in taking the bear side of any crypto coin. This market doesn't always make sense.FTT Open Interest (CoinGlass)Given the sizeable decline in open interest today, I don't think FTT bears are at risk of getting squeezed the same way CEL bears were earlier this year. But FTT dip buyers should consider possible outcomes for FTT as a utility token before trying to catch the knife. If the deal does go through, how likely is a consolidation of accounts onto one platform? If Binance decides to eliminate the FTX exchange entirely and simply move customer asset obligations over to Binance, there would be absolutely no purpose to FTT's existence.SummaryI would just stay way from this market chaos entirely for the time being. While I don't think there is systemic risk to Bitcoin specifically, the entire crypto ecosystem will likely struggle until we get more clarity into the deal between Binance and FTX. Bitcoin is now below $19k. Solana has fallen from $38 to $22 in just two days. Ethereum is down $300 in 48 hours. We've seen a lot of this before. The entire crypto market took a dive after Terra blew up. It did the same when Celsius halted withdrawals. History doesn't repeat, but it rhymes. The best way to play the FTT war is probably with cash for now.This article is written by Mike Fay for reference only. Please note the risks.","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9987701532,"gmtCreate":1667979888227,"gmtModify":1676537993924,"author":{"id":"4110427266616602","authorId":"4110427266616602","name":"Sherwin Mah","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":4,"crmLevelSwitch":1},"htmlText":"Lol tiger brokers invested in them too, what a day. Such sad news. Should we ever be concern with our stocks here at tiger ? If touch wood TB goes outta business/bankrupts, will we still own our shares ?&nbsp;","listText":"Lol tiger brokers invested in them too, what a day. Such sad news. Should we ever be concern with our stocks here at tiger ? If touch wood TB goes outta business/bankrupts, will we still own our shares ?&nbsp;","text":"Lol tiger brokers invested in them too, what a day. Such sad news. Should we ever be concern with our stocks here at tiger ? If touch wood TB goes outta business/bankrupts, will we still own our shares ?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9987701532","repostId":2282135943,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9987703040,"gmtCreate":1667978911980,"gmtModify":1676537993877,"author":{"id":"3573775111920367","authorId":"3573775111920367","name":"Tiongwee","avatar":"https://static.tigerbbs.com/e90910e406e67c77f42e225b16b69020","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9987703040","repostId":2282135943,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":71,"commentSize":2,"repostSize":0,"favoriteSize":2,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2282135943"}