FTX stablecoin withdrawals surge amid liquidation claims

on Nov 7, 2022
  • On-chain data by CryptoQuant founder Ki Young Ju shows FTX’s stablecoin reserve has dropped to one-year low.
  • $451 million worth of stablecoins have been withdrawn from FTX in the past seven days.
  • Changpeng Zhao has claimed Binance plans to liquidate large amounts of FTX’s stablecoins.

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FTX crypto exchange has recorded a surge in stablecoin withdrawals amid crowing unsubstantiated fears surrounding the exchange’s financial status.

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According to Nansen data, more than $451 million in stablecoins have been withdrawn from FTX in the last seven days. There has generally been a flurry of large withdrawals from FTX users after details of FTX’s sister firm Alameda Research balance sheet leaked.

Alameda Research Balance Sheet issue

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According to the leaked Balance Sheet, as of June 2022, Alameda Research has $14.6 billion in assets and about $8 billion in liabilities including $7.4 billion worth of loans. Further, Alameda has listed $3.66 billion in “unlocked FTX token (FTT)” as part of its assets. It also lists a further $2.16 billion worth of FTT tokens as collateral.

The imbalance in the balance sheet has led to insolvency fears which are expected to affect FTX exchange since a huge portion of Alameda’s asset holdings is in FTT tokens rather than traditional assets like fiat currencies.

Although Alameda’s CEO Caroline Ellison, later clarified via a tweet that the leaked balance sheet was just part of the firm’s holding saying that Alameda has an additional $10 billion in other assets, it still wasn’t enough to quell the insolvency fears and market response. As details of the leaked balance sheet circulated, investors started withdrawing funds from FTX.

Some of FTX’s customers who have withdrawn their stablecoins from FTX include Jump Trading, a trading firm with close ties to FTX that withdrew about 40.4 million USDC coins.

Binance to liquidate a huge sum of FTT

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The situation became aggravated after Changpeng Zhao, the CEO of Binance, which is a close competitor to FTX, said that Binance was planning to liquidate a large sum of FTT tokens on the market.

Binance exchange had received $2.1 billion worth of FTT and BUSD stablecoin as part of its exit from FTX equity in 2021. Zhao has said that he intends to sell more than $500 million worth of FTT, something that would potentially bring the FTT price down drastically.

Following the compounded misfortunes, investors are now betting against the FTT token with a majority withdrawing funds from FTX.


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