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The last few days haven’t been exciting for the FTX exchange’s native token, FTT, since rumors regarding the token’s insolvency began surfacing in the market.
In response to these rumors, Binance’s CEO announced in a tweet that the company will be liquidating its share of FTT tokens. The token is down more than 22% since Saturday, which is causing leading investors to believe that FTX is yet another “flywheel scheme”.
Binance Announces Liquidation of More Than $500 million in FTT Tokens
On 06 November, rumors suggesting an FTT token crash started to gain momentum in the market, with many believing that a possible crash could resemble the death spiral that Terra LUNA underwent earlier this year.
Binance’s FTT holdings stem from an exit deal last year, where Binance received FTT tokens in return for its share of equity and has been holding them ever since. Binance CEO, Changpeng Zhao (CZ) tweeted on Sunday,
“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 come to light, we have decided to liquidate any remaining FTT on our books. “
Furthermore, he denied speculation that the move was made against its competitor, saying, “Binance always encourages collaboration between industry players. Regarding any speculation as to whether this is a move against a competitor, it is not. Our industry is in its nascency and every time a project publicly fails it hurts every user and every platform.”
Is FTX Truly Insolvent?
The validity of FTX’s insolvency rumors can be assessed by studying the link between one of the largest crypto hedge funds, Alameda Research, and the second biggest crypto exchange, FTX, both owned by the billionaire CEO Sam Backman-Fried.
Alameda Research, the sister company to FTX, has little in common with the original company except for the fact that Alameda Research holds a significant proportion of FTX tokens- as revealed in a report from CoinDesk.
More specifically, Alameda Research holds total assets worth $14.6 billion, of which $5.8 billion is comprised of FTT tokens. The others are spread across Solana ($3.37B) and $2 billion in “investments in equity securities.”, while hundreds of millions of dollars have been invested in projects owned by Backman-Fried.
As per the balance sheet, the firm has $134 million in cash as of June 2022. While holding roughly $8 billion in liabilities that include loans as well as owed FTT tokens.
These finances reveal that Alameda’s largest asset holdings are indeed FTX tokens, issued by its own sister company, FTX exchange. And while there are no regulations prohibiting this arrangement, the dependence of the firm on its own sister company has raised some skepticism among investors – many believing that this arrangement is another example of a “flywheel scheme”
In response to these revelations, Caroline Ellison, the current CEO of Alameda Research, tweeted: “that specific balance sheet is for a subset of our corporate entities, we have > $10b of assets that aren’t reflected there”
While there is some skepticism that compares the FTX situation to Three Arrows Capital, Sam is quite unworried (as can be seen from his recent tweets), as most of his tweets focus on the features of the coin and don’t address any insolvency rumors.
In addition to that, to balance out the turbulence created by CZ’s tweet that announced Binance liquidating its FTX token holdings, Elison replied to CZ’s tweet stating Alameda Capital is ready to buy all the FTT tokens from the firm for $22 per token, to minimize the impact on the market.
If this is true, and Alameda has the necessary funds to make this purchase, it’s rational to assume that the firm is holding strong. However, that is no reason to discount the interlink between the two sister companies and their heavy reliance on the native token owned by its counterpart. Along with that fact, 93% of the tokens are held by only 10 addresses.
Underconfidence in the token is fair among investors, and it might be time to look at some other tokens that could potentially deliver better returns.
Caroline of @Caroline capital has stated that Alameda will readily buy Binance’s to-be-liquidated FTT tokens are $22 today.
@cz_binance if you're looking to minimize the market impact on your FTT sales, Alameda will happily buy it all from you today at $22!
— Caroline (@carolinecapital) November 6, 2022
3 Coins To Buy During The Dip
Rumors from FTX prompted a market-wide negative sentiment, causing the prices of many cryptocurrencies to drop by a considerable margin. Bitcoin, for example, is down by more than $1000 in a matter of a few days and has been signaling a dip.
Other coins have followed similar patterns, and investors awaiting a chance to enter the market can consider this dip to be the opportunity to add the following coins to their portfolio.
Dash 2 Trade (D2T)
Dash 2 Trade is a trading platform that aims to offer better assistance to investors for all their trading needs. The platform integrates features such as sending trading signals to highlight buying, spot trends and provide on-chain analysis. D2C is currently undergoing a presale and has raised more than $5.6 million- currently in stage 3 of its presale. The token raised half a million dollars on day 1 & is since gained traction, onboarding new investors every day. If you’re looking for a token with high utility, you can consider adding Dash2Trade to your portfolio.
IMPT
IMPT is an eco-friendly crypto project that partners with over 10,000 companies and provides carbon credits to users who make a purchase with the affiliated platforms. Users are rewarded in IMPT tokens which can be exchanged for carbon credits. These carbon credits can either be retired or sold as NFTs or can be exchanged for other NFTs. The project has raised around $12.5 million & is halfway through phase 2 of its presale.
Calvaria (RIA)
Calvaria: Duels of Eternity is a P2E crypto game, where players build a strategic deck of cards available as NFTs and battle against other players to win rewards. These rewards will be paid in RIA tokens, that give users governance rights and can be used to purchase NFTs, or can be staked. Currently, the RIA tokens are available to purchase through a presale, where the token has raised over 1.5 million USDT. Investors can purchase the tokens on the official website before the price increases following phase 4 of the presale.
In related news, Tamadoge- the new popular meme coin, will be listed on Gate.io on Thursday, while Battle Infinity will be listed on the MEXC exchange as of Nov 8, Tuesday.
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