The biggest crypto volume exchange (Binance) and the third-largest crypto exchange by volume (FTX) clashed in recent days after Binance CEO Changpeng “CZ” Zhao tweeted that his exchange would slowly withdraw billions from his holdings in FTX’s native token, FTT, “due to recent revelations that have come to light.”
But first, let’s back up a bit.
Concerns about FTX’s liquidity grew following a Thursday report from CoinDesk on the balance sheet of Alameda Research, a crypto trading firm formerly run by FTX CEO Sam Bankman-Fried. Alameda holds $14.6 billion in assets with $8 billion in liabilities as of June 30, CoinDesk reported.
The report showed that Alameda’s largest assets were about $3.66 billion in “FTT unlocked” and $2.16 billion in “FTT collateral.” (FTT is the token behind FTX.) This means that the total $5.82 billion of FTT held by Alameda is equal to 193% of FTT’s total known market capitalization, or about $3 billion, according to the data. from CoinMarketCap.
“The problem is that Alameda can’t sell even small amounts of its FTT holdings without having a big impact on the price,” Marcus Sotiriou, an analyst at listed digital asset broker GlobalBlock, said in a note. . “CryptoQuant Data […] tells us that there are only around 200-300 active addresses trading the FTT token, which is very small compared to many other large caps. Therefore, large sell orders would cause the FTT price to drop, due to their illiquidity.