Cryptocurrency Market Tanks 10% in Two Days amid FTX Token Crash

UTC by Bhushan Akolkar · 3 min read
Cryptocurrency Market Tanks 10% in Two Days amid FTX Token Crash
Photo: Depositphotos

The collapse of FTX tokens has sent tremors across the entire crypto industry. ETH withdrawals on FTX have skyrocketed by more than 90% in the last few days.

The liquidity concerns surrounding crypto exchange FTX and Alameda Research have spread like wildfire across the entire cryptocurrency market. In the last two days, the broader crypto market has corrected by 10% eroding over $100 billion worth of investors’ wealth amid the FTX token (FTT) crash.

In the last 24 hours, the FTX token price has collapsed by a staggering 75% and is currently trading at $4.54. Over the last 24 hours, more than $2 billion has been eroded from the FTT valuation. This move comes soon as FTX chief Sam Bankman-Fried announced that Binance will be buying the non-US FTX stake for an undisclosed amount.

A few hours later, Binance chief Changpeng Zhao also confirmed the same adding:

“This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire and help cover the liquidity crunch. We will be conducting a full DD in the coming days”.

The deal will be affecting only the non-US businesses of FTX and Binance. The US arm of FTX remains unaffected said SBF. The deal is yet to close as both companies have some due diligence to take care of.

Bitcoin and Altcoins Correct amid FTX Token Crash

The cryptocurrency market is showing signs similar to what it showed after the collapse of crypto hedge fund Three Arrows Capital (3AC) earlier this year. the world’s largest cryptocurrency Bitcoin (BTC) is down by 6.52% as of press time and is currently trading under $18,500.

Similarly, Ethereum (ETH) and most other top-ten altcoins have lost anywhere between 11-20% in the last 24 hours. As of press time, ETH is trading at $1,300 with a market cap of $159.5 billion. There have been massive ETH withdrawals from the FTX exchange ever since Binance announced its stake sale last weekend. Nearly 90% of ETH have moved off the exchange. Earlier this week, on-chain data provider Santiment reported that “in just two days, the amount of #Ethereum held in #FTX‘s main wallet has dropped from 322k to 32k. At one point, the wallet was bleeding 500 $ETH per minute. With the ongoing feud between @SBF_FTX and @cz_binance, expect continued unpredictability”.

However, the biggest impact of the FTC Token collapse has been faced by Solana (SOL). Ethereum-competitor Solana (SOL) has tanked by 50% in the last four days. As of press time, SOL is trading 20% down at a price of $20.36 and a market cap of $7.3 billion. The reason behind the SOL collapse is that FTX’s sister concern Alameda Research has been dumping its SOL reserves and buying FTX tokens to protect it from falling.

Major Risk for Alameda and FTX

As we know, both Alameda Research and FTX are being operated by Sam Bankman Fried. Explaining some of the major risks to Alameda ahead, Jeff Dorman, chief investment officer at Arca said:

“The Alameda hedge fund is tied to FTX through a ton of FTT tokens, and the rumors started that if they are using all of these FTT tokens as collateral … there are two issues. If the price of FTT goes way down, then Alameda could face margin calls and all kinds of pressure; two is if FTX is the lender to Alameda then everyone’s going to be in trouble. What could have been just an isolated issue at Alameda became a bank run. Everybody started to pull their assets out of FTX, and there’s this fear that FTX would be insolvent.”

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