Tensions Rise Between Crypto Exchanges Binance and FTX

https://www.marketwatch.com/story/tensions-rise-between-crypto-exchanges-binance-and-ftx-what-it-means-for-the-market-11667854430

Tensions Rise Between Crypto Exchanges Binance and FTX. What It Means for the Market.

Some investors are concerned that tensions between major crypto exchanges Binance and FTX could weigh on the digital asset market, which has already suffered from price mayhem this year.

Binance is the world’s largest crypto exchange by 24-hour trading volume, while FTX ranks the 3rd, according to Coinranking.

On Sunday, Binance’s founder Changpeng Zhao, often known as “CZ,” tweeted that the exchange would start liquidating its remaining FTT tokens, the native token of FTX, held on its books. To limit market impact, the sale may take a few months to complete, Zhao said.

Binance held about 23 million FTT tokens, worth over $500 million based on its current price, according to a Bloomberg article citing people familiar with the matter. FTT’s total market capitalization stands at around $3 billion, according to CoinGecko. Binance received the FTT tokens as part of its exit last year from an equity investment in FTX, according to Zhao.

Zhao said the decision to liquidate FTT tokens was due to “recent revelations,” without elaborating on what he was referring to. Representatives at Binance did not respond to a request seeking comment for this article. Last week, CoinDesk reported that a huge part of the balance sheet held by Alameda Research, the crypto trading firm owned by FTX Chief Executive Sam Bankman-Fried, consisted of FTT tokens. 

In response, Alameda Chief Executive Caroline Ellison said via a tweet that information “that has been circulating recently” referred to a “specific balance sheet…for a subset of our corporate entities” and that the firm has more than $10 billion of assets that were not reflected in it. In a reply to Zhao’s tweet, she also offered to buy the FTT tokens from Binance at $22.

Bankman-Fried on Monday also responded on Twitter. “A competitor is trying to go after us with false rumors. FTX is fine. Assets are fine,” he wrote. Bankman-Fried did not name the competitor. A representative at FTX declined to comment on the tweet. 

Still, some analysts are worried that the tensions between the two crypto exchanges might spill over to the market, as the rather nascent industry this year already witnessed the collapses of several major players, such as blockchain Terra, crypto hedge fund Three Arrows, lender Celsius and digital asset broker Voyager. Bitcoin BTCUSD, -4.59% has lost more than 55% of its value year-to-date, according to CoinDesk data.

“Tensions between Binance and FTX could spark doubt among the broader crypto industry, including the financial health of Alameda Research and FTX,” said Kevin March, cofounder of Floating Point Group. 

“There could be a potential market retracement in the interim. The possibility of short-term profit-taking, coupled with the FTX FUD (fear, uncertainty and doubt) and the incoming CPI (consumer-price index) print from the U.S., could likely spook the market,” March said. 

Bitcoin lost 1.7% over the past 24 hours to around $20,812, though all three major stock indexes went up on Monday, with the Dow Jones Industrial Average DJIA, +1.31% advancing over 400 points. Cryptocurrencies and stocks often trade in tandem for the past few months. 

Meanwhile, FTX may be suffering from increased withdrawals, analysts said. FTX’s stablecoin reserves hit a yearly low on Monday, down 93% over the past two weeks, indicating low buying pressure, according to data from CryptoQuant. Early Monday, FTX’s hourly withdrawals for ether hit an all-time high, according to CryptoQuant. The FTT token reserve across all exchanges also reached an all-time high on Monday, which implied mounting selling pressure of the coin.

“A self-fulfilling prophecy could arise and has potentially already started,” wrote Michael Agboola, analyst at digital asset broker GlobalBlock, in a Monday note. 

Still, FTT went up 0.1% over the past 24 hours to around $22.38 on Monday, down 12.7% over the past seven days, according to CoinGeko data.