FTX has seen a rise in stablecoin withdrawals over irrational concerns about the crypto exchange’s finances.
According to Nansen, over $451 million worth of stablecoins has been hastily withdrawn from the exchange in the past week. Nansen monitors wallets that it estimates belong to FTX based on data from the blockchain.
FTX was under pressure when Alameda Research’s financial sheet was disclosed. The Block’s vice president of research, Larry Cermak, said, “In crypto when shit gets stress tested, always better being safe rather than sorry even if super low chance.” He stated in a subsequent tweet that the likelihood of FTX insolvency was close to zero.
How the circumstance evolved
Alameda has a total of $14.6 billion in assets and $8 billion in liabilities, including $7.4 billion in loans as of June 2022, according to FTX’s balance sheet. The firm reported $3.66 billion in “unlocked FTT,” the native token of FTX, and $2.16 billion as “FTT collateral” among its assets.
The expected bankruptcy claims arose when a substantial percentage of Alameda’s asset holdings were in FTT, a token established by the company, as opposed to more conventional assets such as fiat currencies.
Caroline Ellison, CEO of Alameda, confirmed that the leaked balance sheet reflected a portion of the company’s holdings and had an extra $10 billion in assets. However, it was insufficient to calm worries and avert a market reaction, and investor funds began withdrawing from the exchange.
Wallets labelled as those belonging to FTX witnessed huge funds transfers to other parties, indicating exchange withdrawals. PeckShield, an on-chain analytics and security service, said that Jump Trading, a trading company with links to FTX, withdrew around 40.4 million USDC.
#PeckShieldAlert ~68.3M stablecoins ($BUSD, $USDT, $USDC) has been transferred from Alameda Research to @FTX_Official from several sources (Circle, Paxos) within the last 4 hours pic.twitter.com/KJFg6u6GsR
— PeckShieldAlert (@PeckShieldAlert) November 7, 2022
Alameda and FTX suffered when Binance CEO CZ announced that his firm intended to dump a large quantity of FTX’s stablecoin. He stated that he intended to sell more than $500 million worth of FTT amid around $2.1 billion worth of the BUSD stablecoin and FTT, which may depress the price of FTT and reduce the value of the exchange’s net assets.
Currently, investors bet against the FTT token. The open interest in FTT-related futures and perpetual derivatives has surpassed $215 million, a 12-month high and a twofold rise from yesterday. Open interest is the total value of unsettled trade contracts in a derivatives exchange.
Additionally, the funding rate on FTT perpetual trading is negative, paired with the high open interest, showing that a substantial amount of traders’ funds are short on FTT, and traders are wagering about the declining FTT price. Currently, FTT is trading at $22.57 and is down 2% on the day, according to CoinGecko.