Home/ Markets / Cryptocurrency/  Panic sell on the cryptocurrency market amid FTT and macro risks

The cryptocurrency market witnessed a panic selling as investors fear over insolvency rumours of crypto exchange FTX. The Bahamian company's native token FTT has nosedived on exchanges. FTT tokens are under pressure despite FTX's founder Sam Bankman-Fried (SBF) denying the rumours. The largest cryptos Bitcoin and Ethereum plummeted drastically weighing on the overall performance of the market.

At the time of writing, on CoinMarketCap, the global crypto market cap is around $984.18 billion -- declining by 4.07% from the last day. On the other hand, in volume terms, the market soared by 46.68% over the last 24 hours to $118.03 billion. Bitcoin's dominance dipped by 0.24% in the last 24 hours to 38.58%.

Currently, the largest cryptocurrency Bitcoin is trading at $19,776 down by 4.7%. While the second largest Ethereum dipped by 5% to trade around $1,491. Both BTC and ETH have now recorded nearly 4% and 6.4% drops on a weekly basis.

Among the top 10 cryptocurrencies, in percentage terms, Dogecoin was the worst hit contracting by over 10%, followed by XRP shedding nearly 6% on Tuesday. DOGE's weekly drop is now over 34%, while XRP slipped by nearly 5% in 7 days. Other cryptocurrencies like Tether, USD Coin, and Binance USD are trading broadly flat. Binance's token BNB is performing volatile, however, in 7 days, the crypto has surged nearly 2%.

FTX's token FTT nosedived by nearly 20%. It was the top trending cryptocurrency in the market. FTX is struggling to hold its $18 mark. Its weekly drop is more than 30%, while in a month, the token's downturn is over 24%.

Investors are offloading FTT tokens on insolvency rumours after a CoinDesk report revealed that Alameda Research's balance sheet was heavily stacked with FTT tokens.

As per the report, Alameda has assets approximately worth $14.6 billion. It stated that Alameda's largest assets were $3.66 billion and locked in FTT, while its third largest assets were worth around $2.16 billion in FTT collateral. That being said, more than $5 billion of Alameda's assets are FTT -- which raised questions about its solvency. Alameda is the sister company of FTX.

Following the news, FTX founder and CEO Sam Bankman-Fried have been criticised over his regulatory proposals.

A crypto analyst Miles Deutscher tweeted saying that Sam Bankman-Fried was once admired as the king of crypto. Now Alameda and FTX are rumoured to be on the brink of insolvency.

In the thread, Deutscher highlighted how everything went wrong for Sam Bankman-Fried and FTX.

SBF is known for its arbitrage trading, founding FTX and Alameda, and making huge successful investments like Solana. He even accrued an impressive estimated net worth of $10-14.5 billion at his peak. Recently, FTX also led huge fundraising rounds for new projects --- Aptos (raised $150 million) and Sui (raised $300 million) were the most latest examples.

Even when Terra tokens suffered billions of losses that led up to their collapse in May this year, Deutscher pointed out that SBF bailed out BlockFi for around $240 million; was also among the bidders for Voyager's assets, and even considered bailing out Celsius.

Then how is it possible that FTX could enter into trouble?

According to the tweet, some cracks started to appear when Alameda CEO Sam Trabucco suddenly resigned in August, which followed   the resignation of FTX President Brett Harrison a month later. The resignations are said to have occurred even before it was revealed that FTX was in a troubled paradise.

However, now concerns have escalated over Alameda's balance sheet which was reported by Coindesk. The report said that Fried's trading giant Alameda rests on a foundation largely made up of a coin that a sister company invented, not an independent asset like a fiat currency or another crypto.

Speculations even arose that the largest crypto exchange in terms of trading volume, Binance's co-founder and CEO Changpeng Zhao orchestrated the whole situation in FTX. Billionaire Zhao who goes by the nickname CZ tweeted the Deutscher thread and said, "The fact that it sparked such levels of "discussions" was surprising. There were also conspiracy theories that I somehow orchestrated this whole thing. If you read this thread, you would appreciate that no one can orchestrate this."

Binance has announced that they are liquidating their holdings of FTT tokens after the rumours sparked. The crypto exchange has opted to be cautious after the experience from LUNA crash.

In another tweet on November 7, Zhao said, "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."

However, SBF has denied the rumours and said that FTX is 'fine'. Notably, the firm made no immediate comments when Reuters contacted them on Tuesday.

Justin d'Anethan institutional, sales director at digital asset firm Amber Group said, "With FTT headed south, below a major support level ... (there are) massive withdrawals out of FTX, across multiple assets," adding, "it seems like investors are selling assets or withdrawing them out - probably will be a messy week," Reuters reported.

Whether FTX will become another failed story of the cryptocurrency market will be keenly watched. For now, investors have become cautious about cryptocurrencies.

Know your inner investor Do you have the nerves of steel or do you get insomniac over your investments? Let’s define your investment approach.
Take the test
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Updated: 08 Nov 2022, 05:19 PM IST
Recommended For You

Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

Let’s get started
Get alerts on WhatsApp
Set Preferences My Reads Watchlist Feedback Redeem a Gift Card Logout