FTX Records Substantial Outflows Amid Rising Liquidity Concerns

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Last Updated on November 8, 2022 by Bitfinsider

According to current data, nearly $451 million worth of stablecoins have left FTX in the past week. The exchange is under intense strain as rumors regarding the balance sheet of its sister company, Alameda Research, develop but remain unproven.

The previous week has witnessed a significant increase in stablecoin outflows from the FTX exchange, causing financial problems for the exchange. As the exchange’s stablecoin reserves have significantly reduced over the previous twenty-four hours, market observers fear another Terra-like crisis.

The past week has seen $451 million in stablecoin outflows due to massive user withdrawals, according to statistics from Nansen. The data also indicates that the FTX reserve has decreased by more than $300 million, with a current balance of $261 million. Another analytics company, CryptoQuant, demonstrated that the current reserve is $107 million. This may be regarded an improvement in light of the fact that it had dropped by more than 90% to $51 million.

The scandal arose when it was reported that Alameda Research had $14.6 billion in total assets and $8 billion in total liabilities, including $7.4 billion in loans. Alameda Research identified $3.66 billion in unlocked FTT, the native token of the FTX exchange, as one of its assets. Concerns about insolvency originated from the fact that a substantial portion of Alameda’s holdings were denominated in FTT, a token issued by the company itself, as opposed to regular fiat currencies or stablecoins.

The CEO of Alameda Research emphasized subsequently that the leaked paper only detailed a part of the company’s holdings. She said that the company owned an additional $10 billion in assets. However, the clarification was unable to calm investor anxieties and avert a market response. As the information spread to additional users, major investors began withdrawing funds from the exchange. The problem was compounded when Binance CEO Changpeng Zhao announced that the world’s largest cryptocurrency exchange intended to liquidate a major portion of FTT tokens. As part of its withdrawal from FTX, Binance had received around $2.1 billion worth of BUSD stablecoins and FTT.

Sam Bankman-Fried, founder of FTX, took to Twitter to reassure users and investors that the exchange was operating regularly. In addition, he stated that the rumors were false and that FTX maintains audited financials and is strictly controlled. He further stated that the exchange has already processed deposits and withdrawals totaling billions of dollars.

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