Secret Solved! Is FTX Going Bankrupt? Why Is Binance Selling FTT? – Cryptokoin.com

The crypto industry is witnessing a new major war between FTX and Binance. The data shows that FTX could be in trouble because of the big exits.

CZ’s game plan or fair play?

cryptocoin.comAs you follow, the crisis surrounding FTX and its underlying token FTT is intensifying in the cryptocurrency community as one of the largest exchanges in the world’s trading activity looks more dubious than a few days ago. According to Binance CEO Changpeng Zhao, they have raised $2.1 billion in BUSD and FTT tokens from their early investment in FTX. They plan to sell their digital assets as a result of SBF’s unethical practices. In the next one to two months, they plan to distribute $600 million worth of assets on the open market.

Despite CZ’s allegations, the Bankman-Fried-led decision against FTX is considered part of a ‘Bank Run’ that resulted in large numbers of customers withdrawing their money from a financial institution and ultimately failing. The plan is working so far. According to data from Dune Analytics, FTX’s 24-hour NetFlow is negative. In other words, there are more tokens issued than invested. Netflow on the platform is $26 million negative.

FTX

The stablecoin USDC has dominated Netflow as shown in the chart below. With rumors of bankruptcy, this metric began to slide down. In longer time frames, FTX recorded a weekly net flow of -86 million dollars and a 30-day net flow of -230 million dollars. So, ‘Bank Run’ just gets worse.

FTX

FTX CEO Sam Bankman-Fried clears the air

Sam Bankman-Fried responded to recent events on Twitter. He claimed that a competitor was trying to discredit them with ‘false rumors’. The boss assured his followers that FTX was ‘good’ and solvent at this. Bankman-Fried wrote:

FTX is enough to cover all client assets. We do not invest in client assets (even treasures). We have processed all withdrawals and will continue to process them. Even if that slows us down, it’s tightly regulated. We have GAAP audits with over $1 billion in cash. We have a long history of protecting customer assets. This still holds true today.

FTX

How did the FTX thing unfold?

A few years ago, Binance helped incubate its biggest competitor today, FTX. They exited their equity position last year and received $2.1 billion for their regular investment. However, this was not paid in cash. Instead, they took the payoff between the stablecoin BUSD and most importantly FTX’s native token FTT.

The crisis focuses on the payment received in the FTT token. “Due to recent disclosures that have come to light, we have decided to liquidate any remaining FTTs on our ledgers,” Binance CEO CZ said on Twitter. He also made the following statement:

We will try to do this in a way that minimizes market impact. Due to market conditions and limited liquidity, we expect this to take several months to complete.

What are the explanations about FTX?

CZ’s announcement came in response to a CoinDesk story about the balance sheet of trading firm Alameda Research. Alameda is (sort of) FTX’s sister company. However, the details are a little darker. The hedge fund company was founded by Sam Bankman-Fried, chairman of FTX, who has long faced questions about the conflict of interest between the two companies.

Exchanges live and die with their liquidity. It is the hardest thing to achieve when starting a new exchange. Traders will follow liquidity, but when you start with zero liquidity, you can’t get traders. And by definition, liquidity comes only from traders. So, it’s kind of like the chicken and egg problem.

Bankman-Fried solved this chicken-and-egg problem by streaming a lot of Alameda’s trades through FTX. So it bootstrapped liquidity. Soon after FTX raced, its growth was phenomenal. Questions surrounding the conflict of interest focus on what information Alameda sees in the market that normal traders do not. Bankman-Fried backed out on this one. But the truth is that Alameda is one of the largest liquidity providers on the exchange. Moreover, he actively trades against customers. Assuming they’re all honest, it’s still easy to see the conflict of interest.

But there are other mixed stories between the two. According to a private financial document, Alameda’s balance sheet broke down. Alameda’s assets reached $14.6 billion on June 30. Of that, $3.66 billion was “unlocked FTT” and $2.16 billion was “FTT collateral.” Below is the asset breakdown, which includes a high dose of Solana, the cryptocurrency in which Sam Bankman-Fried was an early investor and remains a vocal supporter.

Frankly, this is a rather alarming balance sheet of heavily correlated vehicles. But what really stands out is the FTT token, which occupies an astonishing 40%. FTT is, after all, a token created by FTX.

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