© Reuters
By Geoffrey Smith
Investing.com — Pressure on cryptocurrency exchange FTX refused to let up on Tuesday as investors continued to dump its native token in response to concerns about its stability.
FTX fell as much as 30% in late trading Monday before paring losses overnight to trade at $18.42 at 03:45 ET (08:45 GMT), down 18% on the day . It has fallen almost 30% since Coindesk published information last week suggesting that the price of FTT had been inflated by Alameda Research, an FTX-affiliated cryptocurrency investment firm.
The collapse of the FTT dragged down much of the crypto space: and both fell more than 4% to their lowest level in over two weeks. fell more than 10% amid fears that Alameda might be forced to liquidate its large stake in the coin to raise funds to defend the FTT price.
FTT has been under heavy selling pressure since Changpeng Zhao, the CEO of FTX’s biggest rival, said over the weekend that Binance would liquidate its entire stake in the token in response to the Coindesk revelations. . Zhao confirmed on Sunday that Binance had transferred $584 million out of the FTT, but said he expected the overall liquidation to take months, due to the market’s inability to absorb sales on such a large scale.
FTT held around the $22 level for most of Monday after Alameda CEO Caroline Ellison offered to immediately buy all Binance FTT at that level. According to Coindesk, Alameda’s FTT holdings already make up more than a third of its nearly $15 billion total assets.
The tumble below $22 overnight suggests that redemption pressure from investors was too much for Alameda and other FTT market makers to sustain that level.
“Overall, it is clear that FTT market makers are working overtime to maintain the price of FTT,” Kaiko analysts wrote in a daily research note on Monday. “Ultimately, it could be in the interests of all parties to engage in an over-the-counter transaction, as Caroline Ellison suggests, to limit the price impacts, especially considering that Binance, FTX, and Alameda are all at risk of major losses if the price of FTT falls significantly.”
The latest bout of volatility in crypto has echoes of the collapse of the Terra/Luna ecosystem earlier in the year, which prompted investment platforms Celsius and Voyager Digital as well as hedge fund Three Arrows Capital to bankruptcy. Last weekend, Binance’s Zhao drew a direct parallel to this episode, saying he was learning from it by reducing his exposure to TTF.
Zhao also accused FTX of lobbying against the crypto industry – a veiled reference to FTX owner and CEO Sam Bankman-Fried, who backs controversial elements of a US bill that could hamper the growth of finance. decentralized.
On Monday, Sam Bankman-Fried defended himself against Zhao, saying “a competitor is coming after us with false rumors.”
The feud between the two major exchange owners distracted from more negative Binance news on Monday. Reuters that Binance has processed more than $8 billion in transfers with Iran since the United States imposed sanctions on the Islamic Republic in 2018, citing data from consultancy Chainalysis.