FTX Drama Part I: The Fall of a Token
The native token of FTX – a leading, yet new digital currency exchange – took a harsh dip in mid-November after news came about that Binance – one of the world’s biggest crypto trading platforms – was liquidating its holdings of the asset and ending its support for it as a means of preventing competition to its own native currency BNB Coin.
FTX Is Having It Hard
The FTX asset fell by as much as 15 percent following the news, and this leakage eventually made its way into the minds of other assets. Bitcoin, which had been trading in the $20K and $21K ranges, instantly fell back into $19K territory. That’s a six percent drop, while Ethereum fell by as much as five percent.
Instantly, rumors swelled online that FTX was in financial trouble and that the exchange was now facing all kinds of monetary concerns, though Sam Bankman-Fried – the man behind the company – instantly took to social media to claim these were simply rumors and that there was no truth to anything being said. He commented that FTX was “fine” and that there was no cause for alarm.
Unfortunately, the FTX token was down close to 20 percent by the time his words came about, and one unit was trading for less than $18 – its lowest point in nearly two years. In addition, many traders felt obliged to take his statements with a grain of salt, as upon the day of Binance’s announcement, more than $600 million in crypto assets left the FTX exchange from individuals seeking to empty their accounts and move their money elsewhere.
Justin d’Anethan – institutional sales director at digital assets company Amber Group – commented on the situation, stating:
With FTT headed south, below a major support level… (There are) massive withdrawals out of FTX across multiple assets. It seems like investors are selling assets or withdrawing them out. [It] probably will be a messy week.
Not long ago, a leaked balance sheet from Alameda Research – a trading firm also founded by Bankman-Fried – appeared on Twitter. This allegedly caused many traders to lose a degree of confidence in FTX, which ultimately prompted them to begin extracting their funds from the exchange. Matthew Dibb – chief operating officer at Stack Funds in Singapore – mentioned in an interview:
On-chain analytics show hundreds of millions being withdrawn from FTX over the last day. The question of solvency of FTX has been raised given recent events this year… However, we don’t see any hard data as yet that would confirm this type of view.
One of the Largest Crypto Firms
FTX, at only three years of age, is an exchange that has come to fruition relatively quickly.
The company has also made heavy use of television ads and celebrity presences such as that of football legend Tom Brady.
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