Binance Began Liquidating FTX Token Holdings Amid Open Interest In FTT Futures Rise
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FTX Token (FTT) lost nearly 80% of its value after Binance, the world’s largest cryptocurrency firm, announced its intention to acquire the company. The coin’s price was around $22 at the start of the week, but it had dropped to around $5 by Tuesday afternoon. As a result, the sell-off has destroyed more than $2 billion in value.
As a result, Bitcoin and Ethereum fell by more than 10%, as the cryptocurrency market fell significantly. However, the Alameda balance sheet issue and Binance’s decision to liquidate its FTT holdings could be blamed for this decline. It should be noted that Binance’s FTX token holdings are being liquidated as open interest in FTT futures increases. This occurred after Binance CEO Changpeng Zhao stated that “new revelations have come to light.” Investors panicked, as a result, increasing negative bets on demand and pushing open interest in FTT-linked futures to $203 million.
Open Interest in FTT Futures Doubles as Binance Moves to Liquidate FTX Token Holdings
Open interest has doubled to $203 million, with bearish bets in demand, as Binance's entry into the FTX-Alameda drama has caused panic among investors. pic.twitter.com/xu768TwIFU— TechDL-io-Official (@TechDLio) November 7, 2022
At the time, traders appear hesitant to place any bids in order to protect themselves from a massive drop in FTX’s native token, FTT, a cryptocurrency exchange. The current FTX Token price is less than $5, with a 24-hour trading volume of $3,315,999,970. FTX Token has dropped by 72.45% in the last few hours. FTX Token is currently ranked #60 on the market, with a market capitalization of $658,938,317. It has a total supply of 352,170,015 FTT coins and a circulating supply of 133,025,776 FTT coins.
Investors fear Binance’s entry into FTX-Alameda
Binance’s involvement in the FTX-Alameda saga, as previously stated, has sparked widespread concern among investors. As a result, open interest in FTT futures has more than doubled, rising from $87.56 million to a 12-month high of $203 million. According to the most recent data from relevant sources, the annualized cost of maintaining bullish long or bearish short positions has decreased significantly to -36%.
As a result, a negative funding rate indicates that shorts or bears are in charge and willing to pay for additional financing to maintain their positions. Meanwhile, rising open interest and a lower financing rate indicate that traders are selling FTT, and the market is reacting accordingly.
FTT’s Value Continues to Decline
Changpeng Zhao, the CEO of Binance, the largest cryptocurrency exchange, expressed his desire to sell the company’s $530 million investment in FTT, Sam Bankman-FTX Fried’s native coin, on Sunday. Later, Alameda Research CEO Caroline Ellison offered $22 for all of Binance’s FTT tokens.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 Binance (@cz_binance) November 6, 2022
Sam Bankman-Fried, the inventor and CEO of FTX Crypto Derivatives Exchange, gave a speech on October 13, 2022, at the Institute of International Finance (IIF) annual membership meeting in Washington, D.C. But the two richest CEOs in the crypto industry are in long-running fights that have hurt the market for digital assets.
Company’s Solvency Issue
FTT, the native cryptocurrency token of the crypto derivatives trading platform FTX, is held by Binance for more than US$530 million. The wealthy CEO of Binance Holdings Ltd., Zhao “C.Z.” Changpeng, tweeted on Sunday that he intended to sell this stock. Binance and FTX, respectively, are in charge of the sixth- and seventh-largest crypto exchanges in the world.
Changpeng Zhao stated that he made his decision due to “new disclosures.” According to a November 2 report, the FTT token accounts for a sizeable percentage of the balance sheet of Fried’s company, Alameda Research, which engages in banker trading. Zhao’s revelation prompted traders to rush to withdraw funds from FTX, which resulted in a significant decline in the price of FTX.
The CEO of Alameda, Caroline Ellison, responded to that statement on Sunday by saying that this balance sheet only includes a percentage of the business entities owned by the firm and that there are assets worth more than $10 billion that are not included. Later, Ellison offered to acquire all of Binance’s FTT tokens for US$22.
A few notes on the balance sheet info that has been circulating recently:
– that specific balance sheet is for a subset of our corporate entities, we have > $10b of assets that aren’t reflected there— Caroline (@carolinecapital) November 6, 2022
Thus, the confrontation between the two billionaires took place at a bad moment for the industry, which was shaken by multiple scams and drama this year, from the failure of the TerraUSD stablecoin to a string of bankruptcies among crypto lenders. The cryptocurrency industry is “still suffering from PTSD,” according to Anto Paroian, CEO of the hedge firm ARK36.
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