FTT lost 80% of its value in a few hours. Is this a new Terra (LUNA)?
Bogdan LashchenkoThe token of the American stock exchange FTX has lost 80% of its value. Investors who had invested in this token have suffered colossal losses and traders who have had time to get used to the situation and use short positions in futures earned big money. What is the problem and why has the FTT token declined so much in price? Let’s figure it out.
On the morning of November 7, clients of the American crypto stock exchange FTX mentioned the instability of the system. They were dissatisfied with it and started discussing the situation. Users face the problematic process of withdrawing bitcoins from their wallets in the majority of cases. The process was slowed down significantly and transactions were even denied from time to time. There were issues with the withdrawal of other cryptocurrencies. According to the witnesses, the USDC stablecoin withdrawal process using the TRC-20 blockchain took more than three hours instead of five minutes.
The head of the FTX stock exchange reacted to the users’ complaints and discussions on the internet immediately. They stated that the problems appeared only due to the limited network bandwidth and they offered to postpone the withdrawal of USDC, USDT, and other stablecoins until various financial organizations start working.
It is worth noting that the company Nansen found out about the deposit of $257,000,000 on the exchange on the morning of November 7 and connected this event with the recent significant outflow of FTX deposits, about which we have told previously. The analysts found out that this money had come from the company Alameda Research. Besides stablecoins and FTX, a lot of money in Ethereum was withdrawn. The general number of tokens of this altcoin has declined from 493,000 ($739,000,000) to 162,000 ($227,000,000). In such a way, a big sum, which is bigger than $400,000,000, was withdrawn from FTX.
So why has the American crypto exchange faced such problems? On October 27, the head of FTX, Sam Bankman-Fried told all crypto enthusiasts and clients that they were going to launch their new stablecoin, and not the most pleasurable results of the investigation in the direction of FTX emerged on the internet on November 2. The editors of the portal CoinDesk found out that FTX had lots of FTT tokens owned by FTX and Alameda Research. By the way, the head of FTX Sam Bankman-Fried owns a 50% share of FTX and 100% of Alameda Research.
The problems started along with the escalation of the situation in the international crypto exchange market. The head of FTX Sam Bankman-Fried stated on October 27 that the stock exchange was working on the launch of its own stablecoin. On November 2, the results of the investigation made by the CoinDesk portal appeared in the media. FTT is a utility token of the FTX exchange with the help of which trades and other financial transactions can be done. With the help of FTT, you can also get a lower level of commission fee for trades with derivatives.
The CoinDesk investigation proved that Alameda Research had assets worth about $14,600,000,000 as of June 30. The unlocked FTT was worth $3,660,000,000 out of $14,600,000,000 and the collateral FTT and “FTT in provision” — $2,150,000,000. CoinDesk has concluded that the major part of Alameda Research’s assets is their token, which is fully controlled by the company. Alameda Research did not leave this without comment and answered people from CoinDesk who had done the investigation that their accounts also had more than $10,000,000,000 in various assets, which had not been mentioned by CoinDesk.
This buzz surrounding FTX and FTT were not unnoticed. The head of Binance, Changpeng Zhao announced the exclusion of FTT from the list of derivative instruments. At the moment, users can not use the function of futures contracts with the FTX token. The last one, by the way, has suffered a lot and lost its value. In total, the token declined from $22 to $5 in a day. At one moment, the coin even cost $2,75. The clients of the exchange are unable to join big futures contracts and have big Xs. Previously, they had an opportunity to deal with contracts with leverage of 25x, Binance cut this option to 10x and set the maximum transaction threshold of 100 FTT.
The current status of FTT. In just 3 hours, FTT lost over 70% in value
Changpeng Zhao noticed that the decision had been made to fight FTX as a competitor. According to him, Binance wanted to support the stability of the crypto industry, which is still in the process of its formation. CEO of Alameda Research Caroline Ellison answered this statement and said that it was ready to buy out all FTT from Binance for $22.
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The CoinDesk portal also states that, according to the inside documents they had investigated, FTX has liabilities of approximately $8,000,000,000 with securing such tokens as FTT, SOL, and SRM. The conflict between FTX and Binance can lead to a situation when it will be pretty complicated for them to cover the existing credits.
Some analysts have theories about other reasons for the conflicts between Binance and FTX. According to their opinion, Changpeng Zhao’s attitude to FTX and the cut of the functionalities of their token FTT on Binance is impacted by the recent statement made by Sam Bankman-Fried about the support of the Democratic Party in the USA. According to these analysts, Changpeng Zhao can be offended by Bankman-Fried’s position and put spokes in the wheels of FTT on Binance. However, as the recent decline of the currency shows, the limitations of user functions make sense because FTX Token might repeat the story of Terra (LINE) and many clients will suffer colossal losses, which will be even bigger than the ones we have seen in the recent days.
In April, Terra (LUNA) was valued at almost $120 per coin. Now its cost is $0.00019
Amid his statement, Sam Bankman-Fried, the head of FTX can get an opportunity to build relationships with the governing bodies in the USA. Changpeng Zhao from Binance does not have such an opportunity. The biggest crypto exchange regularly faces confrontations with the regulating bodies in America and suffers from their pressure. Besides, the USA frequently tries to investigate the internal state of Binance because they suspect the exchange from Hong Kong is involved in negative things, which can have a bad impact on crypto industry fans.
Analysts think that the unspoken war between Sam Bankman-Fried and Changpeng Zhao motivates the last one to transfer the market liquidity from FTX to Binance. If the situation keeps developing the way we see it today, the events might turn the way the analysts have predicted.
Changpeng Zhao has also said that Binance is going to buy the FTX exchange and get rid of its American competitor in the crypto market. He wrote on Twitter that the Hong Kong exchange will conduct due diligence. Reuters has already stated about the memorandum signing. According to them, the strategic partnership between Binance and FTX might solve the liquidity crisis. Reuters has also revealed the possible takeover of FTX by the Binance stock exchange. It means that the Hong Kong company’s share of the overall crypto market will become even bigger; it will be way more difficult for the rest of the exchanges like OKX, ByBit, and others to compete with Binance.
What is the future of FTT? To The Moon or negative growth? First of all, it is worth noting that FTX is not Terra (LUNA), no matter how trite it may sound. The differences between them will be shown simply by fundamental analysis. Terra (LUNA) was mostly a DeFi project that many people believed in, but which was not backed by any regulators, authorities or anything like that. After the so-called "hacker attack", as the representatives of the project reported, the funds were lost and now the management is developing a new project, Terra, which is aimed at the NFT industry in particular.
Terra (LUNA) token went from $80+ to $0.0002 in less than a week
FTX, unlike Terra, is an international exchange, the owner of which has enlisted the support of the US authorities. As described in this article, FTX is experiencing great difficulties and their forced "cooperation" with Binance can lead to the fact that the company will be completely absorbed. However, it can continue to function, and the US authorities are unlikely to be interested in supporting Sam Benkman-Fried if he is known to the world as a money launderer. The near future will show what Binance will do and it will be possible to build on this and draw any conclusions. In any case, for the time being, it is better to avoid both short positions and accumulative positions on this coin.
Bogdan Lashchenko – content manager at EgamersWorld.Bogdan has been working at EGamersWorld since 2023. Joining the company, he began fillin the site with information, news and events.