David Canellis

Crypto markets are notoriously fickle. Round here, fundamentals don’t power prices to the same degree as stocks — valuations instead tend to reflect a sickly mix of vibes, cult of personality, and memes.



Investing in and trading crypto is murky as a result. Active users, fee generation, total value locked or even developer counts are all metrics that should matter. But <a href="https://blockworks.co/news/crypto-doesnt-care-about-fundamentals-is-that-sustainable">they really don’t</a>.



Sentiment is king, and high correlation between digital assets means that when things are bad for bitcoin, then the rest of the market almost always suffers.



It’s no wonder, then, that the concept of “hated rallies” has emerged as our current bear cycle shows signs of letting up. The idea is that the more hated the crypto, the more likely it is to pump hard as altcoin season sinks in.



Take Solana (<a href="https://blockworks.co/price/sol">SOL</a>), which has attracted haters from the Vitalik-maxi crowd ever since it was dubbed an “Ethereum killer” sometime around 2018. Like Ethereum, Solana supports apps, NFTs, stablecoins and tokens, but with about 100 times the throughput.&nbsp;



Crypto purists — eager to hate on Solana — could argue the network is more centralized than Ethereum on account of its lower node count (around <a href="https://solanacompass.com/statistics/decentralization">2,900</a> to <a href="https://etherscan.io/nodetracker">7,700</a>) and <a href="https://twitter.com/theSamPadilla/status/1674181295335944193">supposedly</a> high costs associated with spinning up a validator node.



Bitcoin diehards, on the other hand, would already simply shit on Solana for running an initial coin offering in the first place. (Its delegated-proof-of-stake consensus model doesn’t do it any favors with the Orange Coin crowd, either.)



Solana hate from the Ethereans and Bitcoiners was augmented by even the fringes of the crypto space when FTX went kaput. Now-convicted fraudster Sam Bankman-Fried was one of Solana’s most <a href="https://twitter.com/SBF_FTX/status/1347964322459262977">obnoxious</a> backers, having <a href="https://blockworks.co/news/solana-community-remains-bullish-despite-ftx-fallout">bankrolled significant chunks</a> of the Solana ecosystem from the ground up.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/15747248/embed#?secret=wo0a9JYhjm" data-secret="wo0a9JYhjm" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Crypto markets are proving how thin the line between hate and love</figcaption></figure>



Solana is one of the best performing top-100 cryptocurrencies this year after rallying more than 400%, going from under $10 to more than $56. SOL has more than doubled in the last month alone.&nbsp;



SOL would still need to multiply three-and-a-half times to hit its all-time high set in 2021. But for all its haters, Solana has easily outstripped the top two: ETH has gained about 70% over the year to date, BTC about 120%.



Other recent “hated rallies” include Terra Luna Classic (<a href="https://blockworks.co/price/lunc">LUNC</a>) — the same cryptocurrency at the heart of <a href="https://blockworks.co/news/one-year-since-terra">Do Kwon’s magnanimously flawed algorithmic stablecoin empire</a>. LUNC was good for a 40-plus-percent one-day rally late last week.&nbsp;



The new edition <a href="https://blockworks.co/price/luna">LUNA</a> token, now spearheaded by the Terra community without Kwon, pushed 73% higher on the same day, while <a href="https://blockworks.co/price/ftt">FTT</a>, the once-native token for Bankman-Fried still-bankrupt crypto exchange FTX, doubled.&nbsp;



Even the floor price for Bored Ape Yacht Club NFTs is up more than 60% since its August lows, going from $37,000 to more than $60,000. For scale, the S&amp;P 500 is up 2% over the same period.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">the most hated rally includes memes, dogcoins, frogcoins, and who knows what else <a href="https://t.co/wYCh30nXLG">https://t.co/wYCh30nXLG</a>&mdash; Meltem Demirors (@Melt_Dem) <a href="https://twitter.com/Melt_Dem/status/1724136900229792132?ref_src=twsrc%5Etfw">November 13, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Does all this mean more haters convert to bigger price pumps? After pulling sentiment readings from data service provider The Tie, I’m not totally convinced.



The Tie recorded long-term negative sentiment for nearly two-thirds of cryptocurrencies in the top 100 by market cap, which aren’t stablecoins, wrapped or otherwise staked tokens. Only about a quarter of those have outperformed bitcoin over the year so far.



East-West connecting <a href="https://blockworks.co/news/layerzero-china-blockchain-sim-cards">Conflux’s</a> 640% jump leads the group alongside Solana, FTT and THORChain, which has quadrupled since January.



At the same time, about a quarter of the top 30 or so cryptocurrencies with positive sentiment at the start of the year have beaten BTC. That includes MakerDAO’s 160% rally and Injective’s monstrous 1,100% push.



(Erik Saberski, vice president of data science at The Tie, told me the long-term sentiment is calculated by collecting Twitter posts about certain cryptocurrencies and measuring how positive or negative they are. It’s a “simple approach commonly referred to as &#8220;bag of words,&#8221; where each word has a sentiment score: some negative, some positive. The overall tweet is positive if the words on average are positive; the negative if the words on average are negative.”)



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/15743246/embed#?secret=0rFWcbHMeU" data-secret="0rFWcbHMeU" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">The biggest rally came from a crypto with positive sentiment</figcaption></figure>



The data suggests that negative sentiment plagued most top cryptocurrencies at the start of the year, with many flipping positive after bitcoin recovered. All to be expected given how brutal this crypto winter has been.&nbsp;



Of course, so many cryptocurrencies with negative sentiment this year have rallied hard — but because practically all of them suffered from bad vibes, one shouldn’t read too much into it.



The data does show something of the opposite. There’s correlation between negative sentiment and poor returns: of the 60 non-stablecoin-wrapped-or-staked tokens in the top 100 that have underperformed bitcoin, two-thirds started out the year with negative sentiment.&nbsp;



ApeCoin, the token meant to one day be the heart of Yuga Labs’ Bored Apes metaverse, is the clearest case, down more than 60% with moderately bad Twitter sentiment. Craig Wright’s BSV — which boasted the most negative sentiment at the start of the year of any cryptocurrency analyzed — is another, having risen only 20% while the rest of the market popped.



So, it could be tempting to base portfolio decisions on how hard haters hate. But it’s probably best to stick to some other tried-and-tested metric — like oh, I don’t know, <a href="https://www.coindesk.com/layer2/2022/10/27/maren-altman-cryptos-tiktok-astrologer/">astrological</a> alignment?



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">David is an Editor based in the Netherlands focused on data-driven journalism. Previously, he wrote for TheNextWeb&#8217;s crypto vertical before launching Protos in 2021. He&#8217;s a reformed hardline Bitcoiner passionate about permissionless and decentralized networks. Contact David at david@blockworks.co</div>


<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Crypto’s most hated rallies may have confirmed the bull market 

Casey Wagner

Crypto prices took a turn into the red Monday, following an explosive week for many tokens. Industry analysts attribute the downturn to premature excitement over anticipated developments in the Web3 sector, compounded by the influence of key macroeconomic data.



Bitcoin has been able to sustain its recent rally, managing to stay above the $36,000 level Monday despite a mild selloff. Solana’s SOL token, one of the biggest winners in the altcoin market recently, faltered as well, losing more than 6% in 24 hours.



FTT, the native token of the now-bankrupt FTX exchange, faltered a bit over the weekend, posting a roughly 3.5% loss on Monday, but <a href="https://blockworks.co/news/sbf-altcoins-market-rally">remains up more than 215% over the past month</a>.&nbsp;



FTX (<a href="https://blockworks.co/price/ftt">FTT</a>) trade volumes have surged to around $500 million. Kaiko analysts say this increase is driven by Binance, which accounts for 86% of FTT&#8217;s trading volume.&nbsp;



Read more: <a href="https://blockworks.co/news/ftx-meltdown-timeline">FTX began to unravel one year ago today: A timeline</a>



“Despite [an] unclear use case, the token continues to be traded on a dozen crypto platforms with average daily trade volume of around $20 million,” Kaiko analysts added.&nbsp;



Ether (<a href="https://blockworks.co/price/eth">ETH</a>) remained one of the few in the green Monday, clocking a close to 2% gain. Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) is still slightly outperforming ether over the month, with a 37% increase.&nbsp;



Traders have invested over $1 billion into bitcoin in the last seven weeks, according to CoinShares data. This might suggest that the recent rally stands apart from other occasional market upswings seen during the bear market.



“Bitcoin [exchange-traded product] trading volumes made up as much as 19.5% of total Bitcoin trading volumes on trusted exchanges,” analysts from CoinShares noted. “This has rarely happened and suggests ETP investors are participating much more in this rally compared to 2020.”&nbsp;



Read more: <a href="https://blockworks.co/news/spot-crypto-etf-ark-invest-21shares">Ark Invest, 21Shares slated to intro crypto ETF suite next week&nbsp;</a>



Data suggests that the crypto industry’s investor base is expanding; another reason why this rally might be different. A recent survey published by the French AMF shows that young investors in the country are increasingly interested in digital assets over equities. 9% of French people already own crypto, the <a href="https://www.amf-france.org/sites/institutionnel/files/private/2023-11/loe-54-ven.pdf">report</a> added. 



Analysts are closely monitoring the upcoming release of US Consumer Price Index (CPI) data, scheduled for Tuesday morning before traditional markets open. The CPI is a critical economic indicator that measures changes in the price level of a basket of consumer goods and services, providing insights into inflationary trends. This release is particularly significant as it occurs one month ahead of the <a href="https://blockworks.co/tag/federal-reserve">Federal Reserve’s</a> next rate-setting meeting, where decisions on monetary policy are made. These decisions are highly influential on market dynamics, particularly in the context of recent inflation concerns.



Current market expectations, <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">informed</a> by data from the Chicago Mercantile Exchange (CME), suggest that the Fed may pause further interest rate hikes. This anticipation stems from recent economic indicators suggesting a potential easing of inflationary pressures. Such a pause could have significant implications for the financial markets, including the cryptocurrency sector, as it might lead to a shift in investor sentiment and risk appetite.



“The next couple of days could be hugely important as the US and UK release inflation figures for October,” Craig Erlam, senior market analyst at Oanda, said. “The two countries&#8217; central banks have, alongside others, <a href="https://blockworks.co/news/central-bank-heads-talk-inflation">been grappling with very high inflation</a> for the last couple of years, and efforts to bring it down are finally bearing fruit.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Traders cool their jets as crypto ETF, FTX reboot optimism fades

Katherine Ross

A judge on Wednesday granted approval to guidelines for the sale of FTX’s digital assets during a hearing.



The decision puts a plan in motion that would see $100 million worth of digital assets sold each week. According to a revised order, also filed Wednesday, the order — if entered on a Wednesday — sets the weekly limit for the week at $50 million.



The weekly order would begin on Saturday at midnight and would be through Friday at 11:59 pm ET, according to the calendar outlined in the Wednesday filing.



CoinDesk <a href="https://www.coindesk.com/policy/2023/09/13/judge-allows-bankrupt-ftx-to-sell-its-crypto-holdings-including-btc-and-sol/">reported</a> that the judge approved the plan while overruling two objections.



In addition, the order requires that <a href="https://blockworks.co/tag/ftx">FTX</a> will be able to sell bitcoin, ether, and “certain insider-affiliated tokens” so long as the “Debtors determine, in their business judgment, to commence sales of Bitcoin, Ether, FTT or certain other insider-affiliated tokens, which must be done through an Investment Manager” with at least ten days written notice.&nbsp;



The <a href="https://blockworks.co/news/ftx-liquidations-traders-nervous">order comes after a tweet</a> from the official FTX account, which said the former crypto exchange “has been actively bridging tokens from various blockchains back to their native blockchains” spurred concern from traders.



In August, FTX sought to <a href="https://blockworks.co/news/ftx-galaxy-assets">tap Galaxy Digital</a> to stake, hedge and manage its crypto.



The filing at the time said that FTX debtors and Galaxy would be “authorized to utilize staking options available through their qualified custodians using their respective private validators if the Debtors determine in the reasonable exercise of their business judgment that such activities are in the best interests of their estates.”



Outside of the bankruptcy, FTX has received over 75 bidders as it looks into a possible FTX 2.0 launch according to a <a href="https://blockworks.co/news/bidders-possible-ftx-relaunch">notice filed earlier this week</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

bankruptcy

FTX can begin selling its digital assets, bankruptcy court rules

Shalini Nagarajan

Bankrupt crypto exchange FTX filed its initial reorganization plan on Monday, suggesting that it will settle creditor claims in cash as part of the repayment process.



The plan proposes valuing customer claims in US dollars as of the bankruptcy date and repaying them from the liquidation of the FTX-linked estates.



&#8220;We are pleased today to deliver on our commitment to file the Plan at this relatively early stage – before the expiration of the customer bar dates, the completion of our pending investigations and the preparation of a disclosure statement,&#8221; FTX CEO John J. Ray III said in a <a href="https://www.prnewswire.com/news-releases/ftx-debtors-file-initial-plan-of-reorganization-and-term-sheet-301889872.html" target="_blank" rel="noreferrer noopener">statement</a>.



Additionally, the plan categorizes the claimants into different groups, such as the Dotcom customer pool (FTX&#8217;s offshore exchange), the US customer pool, NFT holders and general unsecured claims.



As it has done <a href="https://blockworks.co/news/ftx-reboot-is-it-viable">before</a>, FTX considered the prospect of rebooting the company, specifically its offshore exchange, with the intention of excluding US customers from accessing the platform.



“The Debtors [FTX Group] may decide to establish in collaboration with third party investors a new company in a jurisdiction outside of the United States to operate a “rebooted” offshore platform not available to US investors (an “Offshore Exchange Company”) or enter into a merger or similar transaction,” the filing read.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/14606275/embed#?secret=QCwWXiqXBI" data-secret="QCwWXiqXBI" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div></figure>



FTX stated the plan is subject to amendments based on feedback from consulting parties, including representatives of the creditors’ committee. An updated version is scheduled to be filed in the fourth quarter of this year.



According to the plan in its current form, there will be no recovery for its native FTT tokens due to their “equity-like characteristics,” as equity is typically eliminated in US bankruptcy reorganizations.&nbsp;



<ul class="wp-block-list">
<li>FTT jumped up to 13.4% on word of the estate’s new plan, from $1.34 to $1.52, before retracing to $1.47 at time of writing.&nbsp;</li>



<li>That’s still 94% below the $25 recorded just before FTX went kaput last November.&nbsp;</li>



<li>The token’s fully-diluted value is currently about $478 million.</li>
</ul>



Matters still to be resolved include determining the projected size of different claim classes and creditor recoveries, devising a plan for trading or transferring claims once it takes effect, and addressing the future management of the offshore exchange if it is relaunched.



In June, the current FTX management published a <a href="https://restructuring.ra.kroll.com/FTX/Home-DownloadPDF?id1=MTUzNzc0OA%3D%3D&amp;id2=0" target="_blank" rel="noreferrer noopener">report</a> indicating that the exchange owed customers, of which there may be more than a million, about $8.7 billion as of the petition date. 



It further highlighted that $6.4 billion of the owed amount consisted of fiat currency and stablecoins that were misappropriated.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

FTX bankruptcy draft plan hints at offshore exchange reboot, without FTT

The recent resilience of so-called zombie tokens — coins that have risen from the dead after the collapse of their issuers — have shocked crypto traders of late.&nbsp;



The native tokens of Voyager, Luna, FTX and Celsius have now each outlived their troubled crypto parent companies.&nbsp;



FTX’s <a href="https://blockworks.co/price/ftt">FTT</a> is <a href="https://www.bloomberg.com/news/articles/2022-11-17/ftx-s-zombie-token-still-has-a-500-million-market-value" target="_blank" rel="noreferrer noopener">back from the dead</a>, up nearly 150% since the start of the year. And Voyager’s in-house token <a href="https://www.blockworksresearch.com/assets/vgx">VGX</a> has rallied more than 40% over the same period.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/12538332/embed#?secret=UpX7VVG97G" data-secret="UpX7VVG97G" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Zombie coins are all up at least 20% over the past month, but FTT is the clear winner | Chart by David Canellis</figcaption></figure>



Terra Classic (<a href="https://blockworks.co/price/lunc">LUNC</a>) — a separate token from the issuer’s <a href="https://blockworks.co/news/terra-collapse-could-spell-end-for-algorithmic-stablecoins">algorithmic stablecoin that collapsed last May</a> — has clocked a more than 20% increase since the first of the year. Celsius’ native <a href="https://blockworks.co/price/cel">CEL</a> has rallied around 40% in 2023, despite its bankrupt issuer.&nbsp;



Cryptoassets with “large short interest are vulnerable to spikes in price as borrowing costs become unsustainable to hold short positions,” according to Darius Tabatabai, Vertex Protocol’s chief executive. 



“You saw this with equities like GameStop…over the last couple of years, so it isn&#8217;t exclusive to digital assets,” Tabatabai told Blockworks in a statement. 



Crypto volatility is nothing new, but with fewer exchanges facilitating spiking transactions, analysts are wondering who the buyers are.&nbsp;



“By now, we are used to seemingly dead crypto assets experiencing a quick bout of volatility, but we had a bigger question: who is still market making for the FTT token?” Kaiko analysts wrote in a recent <a href="https://marketing.kaiko.com/ftt-returns-from-the-dead?ecid=AOKeC1Yuqk95Az7ww3D_iY4tg7BWg1_qXod0-WduJY7nRU04_st9djyqEniC0PF3ROWTbRBbz7Mn&amp;utm_campaign=Research%20newsletter&amp;utm_medium=email&amp;_hsmi=68069671&amp;_hsenc=p2ANqtz-_Q9LTIBhJXUD8sA9OJtK5jugKY3wJ5BRSdm2Vn7F_kFP3uSZrMi2RruEnYWyoOEE1l-AWixuERoknSJEHA-o7kna1yksgsZLhRvWLDnHlauky0yRk&amp;utm_content=68069671&amp;utm_source=hs_email" target="_blank" rel="noreferrer noopener">research note</a>. “The amount of risk is immense, and we can be sure that there are very few firms left willing to touch anything remotely related to FTX.”



<h3 class="wp-block-heading">Crypto pairs dislocated&nbsp;</h3>



FTT’s low trading volume — which <a href="https://blockworks.co/news/ftx-native-token-ftt-plunges-following-takeover-news">dropped off a cliff when the exchange went under</a> — and its dried-up liquidity has primed the token to rally, but there’s no evidence the run is set to be sustainable, according to the Kaiko analysts. 



When it comes to market depth for the tandem trading pair of FTT and Binance’s <a href="https://blockworks.co/price/busd">BUSD</a> pair, there was only a slight increase in the amount of FTT supplied to its <a href="https://www.investopedia.com/terms/o/order-book.asp#:~:text=An%20order%20book%20is%20an,%2C%20currencies%2C%20and%20even%20cryptocurrencies." target="_blank" rel="noreferrer noopener">order book</a>, according to Kaiko. That’s despite a large increase in price. 



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><a href="https://twitter.com/search?q=%24FTT&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$FTT</a> is up more than 120% since the start of 2023. What gives? Let&#39;s take a look at FTT order books to try and understand the zombie-coin&#39;s recent gains ⬇️ 🧵1/7 <a href="https://t.co/pmrXhIUpQ8">pic.twitter.com/pmrXhIUpQ8</a>&mdash; Kaiko (@KaikoData) <a href="https://twitter.com/KaikoData/status/1617471578094145536?ref_src=twsrc%5Etfw">January 23, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Through Tuesday morning in New York, the equivalent of just $160,000 FTT lies with 2% of the mid-price, the average amount between buyers and sellers, the report added.&nbsp;&nbsp;&nbsp;



&#8220;In our markets, we look more at perpetual swap rates, but the dynamic is much the same,” Tabatabai said. “Add in a general worsening of liquidity through a withdrawal of market makers and capital, and the likelihood for short squeezes such as the ones we are seeing in these assets will be increased.&#8221;



As interest has surged in the native token of <a href="https://blockworks.co/tag/celsius">Celsius</a>, the bankrupt lender is considering issuing a new token in order to make creditors whole, Celsius said in court Tuesday. The potential move would fall in line with previous maneuvers by Bitfinex, an exchange that issued tokens to customers victimized by a hack.&nbsp;



Celsius’ plan would first have to go through a vote from creditors — including customers with funds locked on its platform — but the company’s bankruptcy judge would ultimately make the final decision.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Celsius

Their Issuers Went Bankrupt, but These Tokens Have Survived

In yet another enforcement action, bankrupt exchange FTX’s token FTT is a security, the US Securities and Exchange Commission stated in a complaint Wednesday.&nbsp;



“FTT was offered and sold as an investment contract and, therefore, as a security,” the <a href="https://www.sec.gov/litigation/complaints/2022/comp-pr2022-234.pdf" target="_blank" rel="noreferrer noopener">complaint</a> read. 



SEC Chair Gary Gensler reinforced the designation with a tweet, stating that crypto investors will continue to face risks until platforms fall in line with “time-tested securities laws.”&nbsp;



Gensler then added an SEC priority is to leverage “all our available tools to bring the industry into compliance.” FTT was the 23rd largest cryptocurrency by market value before it collapsed more than 90% last month, worth more than $3.4 billion.



“The classification of FTT as a security is no surprise as it is in line with the LBRY action and the Ripple action,” Abiel Garcia, partner at Kesselman, Brantly &amp; Stockinger LLP, said. “It is clear that the SEC now believes crypto tokens can fall within the securities definition and plans to enforce that concept in full force.”



Indeed, based on a string of prior complaints, regulation by enforcement seems to be the SEC’s preferred method of keeping an eye on the crypto industry.&nbsp;



In a July complaint against a <a href="https://blockworks.co/sec-charges-former-coinbase-product-manager-with-insider-trading" target="_blank" rel="noreferrer noopener">former Coinbase</a> employee and people close to him, the agency alleged that <a href="https://blockworks.co/news/qa-the-sec-classified-9-tokens-as-securities-now-what" target="_blank" rel="noreferrer noopener">nine different</a> cryptocurrency tokens are securities. None of the token issuers mentioned in the complaint are listed as defendants, but the SEC may choose to bring charges against these individuals at a later date. 



The SEC’s ongoing legal battle with Ripple over the network’s <a href="https://blockworks.co/?s=xrp" target="_blank" rel="noreferrer noopener">native XRP token</a> also started with a complaint regarding the token’s classification. Consequently, XRP was <a href="https://help.coinbase.com/en/coinbase/trading-and-funding/cryptocurrency-trading-pairs/ripple-sec" target="_blank" rel="noreferrer noopener">delisted by Coinbase</a> in January 2021, a month after the initial complaint was filed. 



Similar to Ripple, the SEC sued blockchain file-sharing startup LBRY in March 2021 for offering its tokens without first registering with the agency.&nbsp;



Although the LBRY team did not offer tokens to the public in an <a href="https://blockworks.co/tag/ico" target="_blank" rel="noreferrer noopener">initial coin offering</a> (ICO) or similar mechanism, they did keep tokens for themselves in a “pre-mine,” which were subsequently released on secondary exchanges to fund operations, a summary judgment in November 2022 declared. 



<h3 class="wp-block-heading">First FTT, then BNB?</h3>



Without greater clarity around token classification, issuers and exchanges should be prepared to be served with complaints and potentially gear up for lengthy and expensive lawsuits.&nbsp;



“Until the SEC’s position is successfully challenged in court, those dealing in crypto tokens should review their assets to see whether their token could potentially fall within the definition of a security,” Garcia said.&nbsp;



“The FTX complaint lays out the basic facts that the SEC reviews in determining whether a crypto token is a security.”&nbsp;



The rules as they stand are unclear, Garcia said, but looking at LBRY’s judgment and FTX’s complaint, issuers can start to speculate what may or may not be permitted in the future.&nbsp;



There’s also the matter of Binance’s native BNB. In June, <a href="https://www.bloomberg.com/news/articles/2022-06-06/us-probes-binance-over-token-that-is-now-world-s-fifth-largest?sref=10lNAhZ9#xj4y7vzkg" target="_blank" rel="noreferrer noopener">reports</a> swirled that the agency was investigating Binance for selling BNB tokens when it was launching five years ago as an initial coin offering.



“The crypto industry may have to reassess how it launches IEOs and ICOs, given that the LBRY and FTX actions cite to marketing materials when proving that certain tokens should be classified as securities, but in the long run, SEC regulation could provide some transparency and reliability to an otherwise opaque and ever-changing industry segment,” he added.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

SEC FTT Complaint Is Yet Another Case of Regulation by Enforcement

On news that the carnage in the crypto space will impact far more than one exchange, tokens slipped Friday, and FTX coin led the decline following news of <a href="https://cms.blockworks.co/news/ftx-ceo-bankman-fried-resigns-bankruptcy-proceedings-begin/" target="_blank" rel="noreferrer noopener">the firm&#8217;s bankruptcy</a>.&nbsp;



FTT has tanked around 19% in the past 24 hours, putting its seven-day decline at around -90%. Bitcoin and ether, which both posted <a href="https://cms.blockworks.co/news/inflation-cools-bitcoin-and-stocks-bounce/" target="_blank" rel="noreferrer noopener">double-digit</a> gains on Thursday, fell back into old patterns Friday and lost 5% and 4%, respectively, as of 10:30am ET.&nbsp;&nbsp;



“I&#8217;m really sorry, again, that we ended up here,” Bankman-Fried said on <a href="https://twitter.com/SBF_FTX/status/1591089320290816000?s=20&amp;t=xIGJ-Bk1gZhWDUEp9PD9Ig" target="_blank" rel="noreferrer noopener">Twitter</a> Friday. “Hopefully things can find a way to recover.&nbsp; Hopefully this can bring some amount of transparency, trust, and governance to them.”



Sam Bankman-Fried is <a href="https://cms.blockworks.co/news/ftx-ceo-bankman-fried-resigns-bankruptcy-proceedings-begin/" target="_blank" rel="noreferrer noopener">stepping down</a> from his position as CEO of the FTX Group, the official FTX Twitter account announced Friday morning. Around 130 companies affiliated with Bankman-Fried’s FTX Group have also commenced voluntary bankruptcy proceedings.&nbsp;



“The market is in flux, and it would be pointless to try and make any short to medium-term predictions right now,” Chainalysis analysts wrote in a <a href="https://blog.chainalysis.com/reports/state-of-crypto-markets-ftx-november-2022/" target="_blank" rel="noreferrer noopener">note</a> Friday.&nbsp;



Investors are nervous, Chanalysis analysts said, pointing to increasing crypto-to-stablecoin and crypto-to-USD trading volume on exchanges.&nbsp;



“In times of volatility and panic, we’d expect crypto users to seek shelter with the stability of fiat currencies,” the note read. “There are two ways to do this: Trading for stablecoins pegged to fiat currencies like the U.S. dollar, or liquidating entirely and swapping cryptocurrency for fiat.”



The contagion has already set in across the industry. Crypto lender <a href="https://cms.blockworks.co/news/blockfi-stops-withdrawals-hinting-ftx-mess-can-only-get-worse/" target="_blank" rel="noreferrer noopener">BlockFi</a>, which FTX bailed out earlier this year amid 2022’s first round of crypto turmoil, has suspended withdrawals. The suspension comes only two days after the lender assured users that it was fully operational.&nbsp;



BlockFi said the uncertainty surrounding FTX.com, FTX US, and Alameda Research makes it unable to operate as usual in a Tweet Thursday.&nbsp;



“Co-founder Flori Marquez had earlier tweeted the firm remained an independent entity despite its bailout deal with FTX — implying that it was mostly unaffected by the exchange’s implosion,” Ryan Selkis, Messari founder, said in a note Friday. “The meltdown of crypto exchange FTX is heavily impacting markets — but on a more personal level, employees who believed they worked for one of the most credible crypto platforms are reeling.”



A Canadian <a href="https://cms.blockworks.co/news/ontario-teachers-fund-sank-95m-in-failed-ftx-empire/" target="_blank" rel="noreferrer noopener">teacher pension</a> fund also reported exposure, to the tune of roughly $95 million tied up in Bankman-Fried’s empire, per <a href="https://financialpost.com/fp-finance/cryptocurrency/ontario-teachers-pension-plan-board-ftx-binance" target="_blank" rel="noreferrer noopener">Financial Post</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Crypto Erases Gains, FTX Token Slips Further on Bankruptcy News

Macauley Peterson

The FTX.com international exchange has long offered traders a variety of perks for holding and staking FTT, the exchange’s native token. Following the news of some sort of buyout deal <a href="https://cms.blockworks.co/binance-triggers-liquidity-crisis-then-acquires-bankman-frieds-ftx-crypto-exchange/" target="_blank" rel="noreferrer noopener">tentatively reached between FTX and Binance</a>, the future of FTT is in doubt.



For trades on FTX, holding various amounts of FTT in an account offered up to a 60% fee discount, among other benefits.&nbsp;



But Binance has its own BNB token, which likewise provides <a href="https://support.binance.us/hc/en-us/articles/360046786894-Using-BNB-to-Pay-for-Fees" target="_blank" rel="noreferrer noopener">diminished fees</a> — leading to <a href="https://twitter.com/myuberislate/status/1590013423571865601" target="_blank" rel="noreferrer noopener">industry chatter</a> that an FTT token could well become redundant.



After <a href="https://cms.blockworks.co/solana-ftt-bounce-hard-following-binance-buyout/" target="_blank" rel="noreferrer noopener">an initial bounce</a>, FTT has fallen sharply Tuesday, down over 70% on the day through 3 pm ET.


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="684" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/11/FTT-USD-Tether-1-2-1024x684.jpg" alt="FTT USD Tether" class="wp-image-37913" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/11/FTT-USD-Tether-1-2-1024x684.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/FTT-USD-Tether-1-2-1024x684.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/FTT-USD-Tether-1-2-1024x684.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/FTT-USD-Tether-1-2-1024x684.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/FTT-USD-Tether-1-2-1024x684.jpg?w=385 385w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/FTT-USD-Tether-1-2-1024x684.jpg?w=391 391w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/FTT-USD-Tether-1-2-1024x684.jpg?w=328 328w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/FTT-USD-Tether-1-2-1024x684.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/FTT-USD-Tether-1-2-1024x684.jpg?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/FTT-USD-Tether-1-2-1024x684.jpg?w=1998 1998w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Source: TradingView</figcaption></figure></div>


Spot trading of FTT — which is <a href="https://ftx.com/ftt" target="_blank" rel="noreferrer noopener">ostensibly off limits</a> to US traders — is <a href="https://www.coingecko.com/en/coins/ftx-token#markets" target="_blank" rel="noreferrer noopener">only available</a> on a handful of crypto exchanges, principally FTX itself and Binance.



In a recent market-rattling move, Binance’s CEO Changpeng ‘CZ’ Zhao said his firm would divest from the FTT token, before changing course entirely and making public his preliminary intention to acquire the firm. The deal, which is contingent on due diligence and finalizing terms, does not include FTX’s US arm.&nbsp;



On Nov. 5, FTX transferred 23 million FTT tokens, then worth $584 million, from Binance cold wallets to the exchange. CZ <a href="https://twitter.com/cz_binance/status/1589329217874931712" target="_blank" rel="noreferrer noopener">confirmed</a> on Monday that the transfer was “part of” the Binance investment. That represented a significant fraction of the total volume of FTT trading, considering sellers ran rampant and liquidity hit a wall. 



<h3 class="wp-block-heading">A liquidity crunch of epic proportions</h3>



The relative illiquidity of the token meant that Binance could not sell en masse on the open market. That reality, no doubt, prompted the now-infamous tweeted offer to snap up of all Binance’s stake at $22 per FTT from Alameda CEO Caroline Ellison.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><a href="https://twitter.com/cz_binance?ref_src=twsrc%5Etfw">@cz_binance</a> if you&#39;re looking to minimize the market impact on your FTT sales, Alameda will happily buy it all from you today at $22!&mdash; Caroline (@carolinecapital) <a href="https://twitter.com/carolinecapital/status/1589287457975304193?ref_src=twsrc%5Etfw">November 6, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The move placed a temporary floor under the FTT price. But it didn’t last.&nbsp;



As of early Tuesday — around 2:30 am ET — FTT broke down and never recovered. By 3:00 pm in New York, the token was in the midst of a bounce from a low of roughly $2.60 and trading for between $4 and $5 in a very volatile market environment.



The FTX exchange suffered from a crisis of confidence, according to Peter Eberle, chief investment officer and president of the digital-asset focused investment manager Castle Funds.



&#8220;FTX had massive outflows from their exchange as everyone feared losing online assets,” he told Blockworks via email. “This means that market makers also removed assets and that removed liquidity. Many traders seem to have backed away or reduced their trading size.”



When fear takes hold, a lack of liquidity in already sparsely traded markets can be particularly deadly.



A spokesperson for FTX was not available for comment.



Ornella Hernandez contributed reporting.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

FTX Native Token FTT Plunges Following Takeover News

Sam Bankman-Fried’s Twitter account has posted a thread claiming that <a href="https://cms.blockworks.co/binance-triggers-liquidity-crisis-then-acquires-bankman-frieds-ftx-crypto-exchange/" target="_blank" rel="noreferrer noopener">Binance has bought FTX, the exchange</a> that he had built into a global crypto titan.



FTX’s native token, FTT, is soaring following disclosure of the alleged impending Binance buyout, and has recovered from a low of $14.57 to over $19 — a 36% recovery. FTT went on to crash to below $10, down nearly 60% on the day as of 1:30 pm, ET.



Solana’s native asset, also heavily backed by Bankman-Fried, had recovered 22% from its local low of $24.77 posted earlier today. The token had fallen up to 30% throughout the <a href="https://cms.blockworks.co/binance-ceo-goes-full-fud-in-attempt-to-bury-ftx/" target="_blank" rel="noreferrer noopener">public feud</a>, which had mostly played out via Twitter. It&#8217;s now hovering back around those lows.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" class="wp-embedded-content" sandbox="allow-scripts" security="restricted" src="https://flo.uri.sh/visualisation/11747912/embed#?secret=UJUiOStvr9" data-secret="UJUiOStvr9" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption>SOL and FTT briefly pumped before tanking considerably</figcaption></figure>



Binance founder Changpeng Zhao <a href="https://twitter.com/cz_binance/status/1590013613586411520" target="_blank" rel="noreferrer noopener">tweeted</a> about the deal, noting that, “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 FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days,” Zhao said.



<a href="https://cms.blockworks.co/binance-buying-ftx-news-enough-to-pull-crypto-back/" target="_blank" rel="noreferrer noopener">Bitcoin and ether are both recovering fast</a> since a precipitous drop on Saturday night — when Zhao declared Binance would soon dump hundreds of millions of dollars in FTX’s native token FTT in response to rumors of Alameda Research’s insolvency.



Despite the neutral name, Alameda Research is Bankman-Fried’s quantitative crypto trading shop, which sometimes doubles as a venture capital firm.&nbsp;



It’s technically a separate company to crypto exchange FTX, but leaked documents earlier this month suggested the unit maintained considerable exposure to Bankman-Fried-backed tokens FTT and solana.



Alameda CEO Caroline Ellison has said the leaked balance sheet omits some $10 billion in other assets, as well as investment hedges on its long positions cited in the document.&nbsp;



While crypto markets overall had turned sour since the Binance founder effectively declared war on direct rival Sam Bankman-Fried, cryptocurrencies in the latter’s direct orbit were tanking far worse than the blue chips.



Serum, the native token of the decentralized exchange of the same name co-founded by Bankman-Fried, had lost 9% over the past three days as of 11:15 am ET. Bonfida (FIDA), another token powering Solana’s decentralized market ecosystem, was down 10%.&nbsp;



Both assets, alongside solana and FTT, were featured in Alameda Research’s leaked balance sheet published last week.



Updated Nov. 8 at 1:18 pm ET.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/thebreakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forwardguidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha directly in your inbox.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/supplyshock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Binance

Solana, FTT Bounce Hard on Binance Buyout — Then Crash Harder

Sebastian Sinclair

Two of crypto’s most powerful figures — Binance founder Changpeng Zhao and FTX CEO Sam Bankman-Fried — are locked in a rare public feud fueled by rumors and leaked documents.



Over the past week, rife speculation has posited that the cryptocurrency exchange FTX’s sister organization, Alameda Research, a quantitative trading shop-cum-venture capital firm, is facing insolvency. It’s known that Alameda, like many of its rivals, has been hit hard by turbulent market conditions and plunging venture-backed digital asset startup valuations.&nbsp;



The company has denied the notion that it’s on the verge of insolvency.



Alameda’s balance sheet, <a href="https://www.coindesk.com/business/2022/11/02/divisions-in-sam-bankman-frieds-crypto-empire-blur-on-his-trading-titan-alamedas-balance-sheet/">reported</a> by CoinDesk last Wednesday, showed about 40% of the firm’s $14.6 billion of assets were attributed to FTT, FTX’s native token that powers trades on the exchange.



Solana, the cryptocurrency behind the Bankman-Fried-<a href="https://twitter.com/SBF_FTX/status/1347964322459262977">backed</a> blockchain, contributed nearly $1.2 billion, or about 8%. Relatively illiquid digital assets serum, maps, oxy and fida — all part of Alameda’s portfolio — made up some of the remainder, alongside loans, cash and equivalents, as well as $2 billion in undisclosed equity stakes.



So much exposure to tokens operationally close to Bankman-Fried and his companies immediately drew criticism from industry watchers, who worked to map various doomsday <a href="https://dirtybubblemedia.substack.com/p/is-alameda-research-insolvent">scenarios</a> that could lead to Alameda’s implosion, perhaps in a Celsius-like manner.



Alameda CEO Caroline Ellison addressed the growing skepticism surrounding Alameda’s financial health on Sunday. She <a href="https://twitter.com/carolinecapital/status/1589264375042707458?s=20&amp;t=deOy9cs1PagFf_8j4fLUAQ">rebuffed claims</a> that the firm is on the verge of insolvency, tweeting that the leaked balance sheet didn’t provide the full scope of Alameda’s assets.



Alameda has more than $10 billion of assets that weren’t taken into account in CoinDesk’s report, Ellison said, as well as a series of unspecified investment hedges intended to counteract the asset manager’s supposed outsized exposure to its own assets.



An hour later, Binance CEO Zhao tweeted he would liquidate his firm’s substantial FTT holdings — in a rare public instance of telegraphing a move before selling, one source said. The source, who spoke on the condition of anonymity to discuss sensitive business dealings, adding that doing so would invite the price to plunge.&nbsp;



By his reasoning, Zhao said the move was a “post-exit risk management” strategy, <a href="https://twitter.com/cz_binance/status/1589374530413215744?s=20&amp;t=8dOHvd2o5-E9KLi_Xf9cIw">invoking</a> Do Kwon’s failed algorithmic stablecoin ecosystem Terra.



Binance intends to offload its position over the next few months in a bid to minimize market impact, <a href="https://twitter.com/cz_binance/status/1589283421704290306?s=20&amp;t=VckhPGV0NEOlUAqjiUCVtg">Zhao tweeted</a>. The exchange acquired $2.1 billion in FTT and Binance’s stablecoin BUSD as part of an exit from its FTX equity stake last year, he said.



While Binance’s total FTT holdings are not known, chain watcher Whale Alert tweeted on Sunday that roughly $585 million in FTT had been transferred to Binance as part of its liquidation efforts.&nbsp;



The transfer was later <a href="https://twitter.com/cz_binance/status/1589329217874931712?s=20&amp;t=bD1T_i01OAFElKpROE7X2g">confirmed by Zhao</a>. Notably, Zhao’s tweets — and the transfer — occurred on Sunday, when markets are historically at their most inactive, translating to amplified price movements. FTT currently trades around $22.46, which is about 12% below its price point before Zhao’s dump pledge.



Ellison said FTX would buy Binance’s entire FTT stash at a rate of $22 per token.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">worth noting Caroline’s tweet constitutes an offer which, if accepted, creates a legally enforceable contract <a href="https://t.co/2rG7ZwiEJG">https://t.co/2rG7ZwiEJG</a>&mdash; Matthew Graham in Lisbon (@mattysino) <a href="https://twitter.com/mattysino/status/1589344279503466496?ref_src=twsrc%5Etfw">November 6, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption>Doing deals on crypto Twitter could bring regulatory concerns.</figcaption></figure>



<h3 class="wp-block-heading">Bankman-Fried and Zhao’s unfriendly rivalry</h3>



Bankman-Fried and Zhao’s sparring is the culmination of weeks of social media tit-for-tats. In an Oct. 19 <a href="https://www.ftxpolicy.com/posts/possible-digital-asset-industry-standards">blog</a>, Bankman-Fried outlined proposals for a set of regulatory standards for the crypto industry.



The pair are in charge of the world’s top two crypto exchanges by daily volume. Binance handles some $7.3 billion in daily trades, while FTX manages roughly $2.6 billion. Their US-regulated platforms process considerably less — $380 million per day for Binance and about $174 million for FTX.&nbsp;



Over the past few years, Bankman-Fried has been fashioned into something of a media darling. He regularly appears on mainstream television from his <a href="https://www.youtube.com/watch?v=ZmWE_tRSlow">gamer chair</a> and has starred in viral <a href="https://www.youtube.com/watch?v=W0vEdn2jwyI">videos</a> that publicize his Toyota Corolla (not a Lambo!) and his ideals of effective altruism, which would see Bankman-Fried give away most of his immense fortune to charity.



Zhao, on the other hand, plays the role of the quintessential crypto nomad, having bounced around the world as many times as Binance’s flagship platform has switched jurisdictions. He’s recently <a href="https://www.bloomberg.com/news/features/2022-06-23/binance-bnb-ceo-moves-to-dubai-as-us-regulators-target-the-crypto-exchange#xj4y7vzkg">taken root</a> in glitzy Dubai, where his own wealth appears to have opened the doors to a sense of belonging.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">excited to see him repping the industry in DC going forward! uh, he is allowed to go to DC, right?&mdash; SBF (@SBF_FTX) <a href="https://twitter.com/SBF_FTX/status/1586565810700619778?ref_src=twsrc%5Etfw">October 30, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption>Sam Bankman-Fried took a shot at Zhao, infamous for globe-trotting regulatory arbitrage.</figcaption></figure>



While Zhao has publicly fought to keep three-letter US agencies both at bay and <a href="https://www.reuters.com/business/binance-us-ceo-brian-brooks-resigns-2021-08-06/">on-side</a>, Bankman-Fried has historically played a central role in shaping the narrative around crypto regulation.&nbsp;



He’s lobbied extensively and contributed millions of dollars in donations to political candidates, including being the second-highest <a href="https://www.opensecrets.org/2020-presidential-race/joe-biden/contributors?id=N00001669">donor</a> to President Joe Biden’s campaign before the 2020 US election.



But Bankman-Fried’s proposals last month ruffled <a href="https://twitter.com/BanklessHQ/status/1586156300832215041?s=20&amp;t=tZfnwmdM5aSL1ezYlqtPPA">feathers</a>, included ceding ground to the US Treasury’s Office of Foreign Assets Control by automatically blacklisting sanctioned blockchain addresses.



Bankman-Fried also floated the establishment of a licensing regime for DeFi protocols and other blockchain-powered platforms set up by US individuals, leading to allegations of statism from some crypto purists.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">.<a href="https://twitter.com/ErikVoorhees?ref_src=twsrc%5Etfw">@ErikVoorhees</a> and <a href="https://twitter.com/SBF_FTX?ref_src=twsrc%5Etfw">@SBF_FTX</a> may agree on a lot, but not this. Which argument wins you over? <a href="https://t.co/Ne6otaoN1W">pic.twitter.com/Ne6otaoN1W</a>&mdash; Bankless (@BanklessHQ) <a href="https://twitter.com/BanklessHQ/status/1588201843561299980?ref_src=twsrc%5Etfw">November 3, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption>Crypto veteran Erik Voorhees debated Bankman-Fried last week.</figcaption></figure>



“We are not against anyone,” Zhao tweeted on Sunday in an apparent response to Bankman-Fried’s commentary on regulation. “But we won&#8217;t support people who lobby against other industry players behind their backs.”



<h3 class="wp-block-heading">FUD for me but not for thee</h3>



Binance’s CEO attempted to <a href="https://twitter.com/cz_binance/status/1589283430684319744?s=20&amp;t=bD1T_i01OAFElKpROE7X2g">dispel notions</a> that offloading its FTT holdings was not part of a move against FTX, but more that it had purportedly held onto the asset long enough.&nbsp;



The token currently trades nearly 75% below its all-time high reached last November, which means Binance has left plenty of gains on the table by opting to sell now.



Responding to the question of why Binance has waited so long to offload its FTT, Zhao claimed it’s meant to remove doubt the exchange would attack a competitor.&nbsp;



“We want the industry to grow together,” Zhao said. “But there is a limit to hold.”



In any case, traders and other investors are taking heed of the muddled situation, pulling stablecoins, <a href="https://twitter.com/0xhamz/status/1589607389833363457?s=46&amp;t=qCzJNlmJAlYOmVToRyuKSA">derivatives</a> and other digital assets from the platform en masse. Binance and FTX did not immediately respond to requests for comment.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><a href="https://twitter.com/search?q=%24FTT&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$FTT</a> token reserve across all exchanges reached an all-time high. 60% of the circulating supply is in exchanges.<a href="https://t.co/B8RDLyJEV0">https://t.co/B8RDLyJEV0</a> <a href="https://t.co/DdxrxNyAAQ">pic.twitter.com/DdxrxNyAAQ</a>&mdash; Ki Young Ju (@ki_young_ju) <a href="https://twitter.com/ki_young_ju/status/1589403853195464705?ref_src=twsrc%5Etfw">November 6, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption>More FTT is now on exchanges than ever before.</figcaption></figure>



It’s certainly ironic that Binance’s Zhao, who has pandered to faithfuls by positioning himself as a fighter of all things FUD (fear, uncertainty and doubt), has so quickly pounced on wavering public perception of his direct rival Bankman-Fried.&nbsp;



Curiously, Zhao now seems content to not only lean into media speculation, but incite it directly despite having repeatedly <a href="https://twitter.com/cz_binance/status/1198092831560126464">threatened</a> to <a href="https://www.coindesk.com/markets/2021/02/08/binance-drops-defamation-lawsuit-against-forbes-over-tai-chi-document/">sue</a> journalists and their news <a href="https://cms.blockworks.co/alleging-defamation-binance-ceo-sues-bloomberg-hong-kong-subsidiary/">outlets</a> throughout the years.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.



<hr class="wp-block-separator has-alpha-channel-opacity"/>