- An FTX bank run to the Binance exchange for about US$584 million was spotted by market observer Whale Alert, and CZ confirmed that it was a part of the liquidation.
- The native token of FTX, the second-biggest cryptocurrency exchange in the world, FTT, has been put up for sale by Binance, the largest cryptocurrency exchange in the world.
- Alameda Research has around $6 billion worth of FTX Tokens (FTT) on its financial sheet. Regardless, Binance’s FTX bank run has already started.
- The dispute is exerting pressure on FTT, which has seen its market value fall by about 11% during the last two days.
Whale Alert, a market observer, observed an FTX bank run to the Binance exchange for about US$584 million. The largest cryptocurrency exchange in the world, Binance, has started selling its holdings in FTT, the native coin of FTX, the second-largest cryptocurrency exchange in the world.
FTX bank run: Binance vs FTX
It’s a striking instance of conflict between two of the largest cryptocurrency names in the world.
Changpeng “CZ” Zhao, the head of Binance, cites the recent disclosures regarding Alameda Research’s balance sheet as his justification for leaving.
The second half of Sam Bankman-($SBF) Fried’s billions dollar cryptocurrency enterprise is a hedge fund called Alameda Research.
Alameda Research’s balance sheet is loaded with about US$6 billion in FTX Tokens (FTT), per a CoinDesk investigation.
“While there is nothing per se untoward or wrong about that, it shows Bankman-Fried’s trading giant Alameda rests on a foundation largely made up of a coin that a sister company invented, not an independent asset like a fiat currency or another crypto,” the report said regarding the alegged FTX bank run.
It would make Alameda’s bag of FTX Tokens (FTT) more than the token’s whole circulating market capitalization, which is only US$3bn at the time of writing, if the information on the leaked balance sheet is accurate. This is not right.
Unsurprisingly, there has been controversy surrounding the fact that the majority of Alameda’s net equity is made up of cryptocurrency that its sister business FTX has created.
Caroline Ellison, the chief executive officer of Alameda, said that the incomplete nature of the balance sheet was revealed.
“That specific balance sheet is for a subset of our corporate entities, we have more than US$10bn of assets that aren’t reflected there,” Ellison said on Twitter in a response to the FTX bank run allegations.
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
That assertion, however, is unlikely to allay concerns that one of the most well-known investment businesses in the cryptocurrency industry has been supporting its balance sheet with crypto assets of questionable worth from its sister company.
Whatever the case, Binance’s FTX bank run has already begun.
Market watcher Whale Alert noticed a FTX bank run to the Binance exchange for almost US$584 million, which CZ confirmed was a part of the liquidation.
Yes, this is part of it. https://t.co/TnMSqRTutr
— CZ 🔶 Binance (@cz_binance) November 6, 2022
In an ongoing Twitter argument, CZ has been blunt in his criticism of Alameda’s financial plan, even equating it with the defunct Terra LUNA coin.
Pressure from the debate is causing FTT’s market value to decline nearly 11% in the last two days.
As significant holders scramble to sell their holdings before anxiety spreads throughout the market, a bank run is now a possibility.
The number of new holdings in FTT futures has quadrupled, and many of them are probably short positions betting on a decline in the token’s price (though this has not been quantified).
Stablecoins worth approximately US$450 million were being removed from the exchange by FTX users as of the time of writing, according to Nansen.
Interestingly, Binance’s (so far) US$500 million FTX bank run was about equal to the US$500 million investment the business made in Elon Musk’s acquisition of Twitter.
Bank run meaning
When several customers of a bank or other financial institution simultaneously withdraw their savings out of worry for the bank’s stability, this is known as a bank run.
The likelihood of default rises as more people withdraw their money, which encourages additional people to do the same. Extreme circumstances may arise where the bank’s reserves are insufficient to cover the withdrawals. We hope this incident won’t end up like the Terra Luna crash.