Binance vs FTX - a Game of Thrones

GB Market Commentary 07/11/2022

by Marcus Sotiriou

The crypto community was kept thoroughly entertained over the weekend, as two of the biggest crypto exchanges, FTX and Binance, are seemingly at odds with each other.

Concern around FTX’s liquidity started on Thursday when CoinDesk released Alameda Research’s balance sheet. The report showed that Alameda hold $14.6 billion in assets with $8 billion in liabilities. Their largest asset reported was FTT, shown to be worth $5.8 billion, which is ‘roughly one third of their assets and equal to 88% of Alameda’s net equity.’

Active Addresses graph

A significant portion of their assets is a token issued by another related party (FTX). In fact, the $5.8 billion of FTT on Alameda’s balance sheet is equal to 193% of the total FTT market cap at time of writing.

The issue is that Alameda cannot sell even small amounts of their FTT holdings without heavily impacting the price. Data from CryptoQuant, as shown above, tells us that there are only around 200-300 active addresses trading the FTT token, which is very small in comparison to many other large caps. Hence, large sell orders would crash the FTT price, due to being illiquid.

CZ, the Binance CEO, then announced that Binance have decided to sell all their FTT tokens (the native token of FTX), worth $500 million, after some news had come to light. This created panic in the market, as investors were even more concerned about the health of FTX.

SBF, the CEO of FTX, has affirmed today that allegations about FTX’s liquidity are just rumours and they are fine.

A self-fulfilling prophecy could arise and has potentially already started. We have already seen FTX’s lending book drop by 50% from $2.5 billion to $1.25 billion, and the USDT book dropped 60% from $500 million to just over $200 million, in just the past 24 hours. Ethereum withdrawal from exchanges, and FTT tokens on exchanges, have both reached an all-time-high, showing a clear lack of certainty from investors.

Whether or not FTX has enough reserves to weather the crypto winter is yet to be seen, but at this point, Binance is winning the exchange war.