Battle of the CEXs: FTX vs Binance

A recently published article by Coindesk revealed that Almeda Research, a trading firm owned by FTX’s CEO Sam Bankman-Fried, had $14.6 billion of assets as of June 30, 2022, as against its $8 billion of liabilities. However, what was worrisome to everyone in the crypto community is that Almeda has a whopping 71% of its assets tied in crypto tokens. As though that wasn’t alarming enough, 48% of these assets are either in FTT or SOL. 

Before we get to the interesting part, let’s quickly paint a picture here so that one could get a good idea of what we are trying to point out. Almeda Research holding most of its assets in FTT, FTX’s native token, means there is a closer relationship between both companies which are owned by the same man – Sam Bankman-Fried. Furthermore, Alameda & FTX holds a total of 245M $FTT ($5.65B), accounting for 74.51% of the total supply, which means that these companies could run down the token’s price if they decide to liquidate their assets.

Now, this is where it gets interesting. FTX and Almeda Research would obviously not dare to make such a move as they would only be hurting themselves. But guess who can make such a move to hurt FTX and Almeda Research? Yes, CZ and the Binance exchange. Binance apparently holds a total of 24.35M $FTT 

Binance holds a total of 24.35M $FTT ($56M), accounting for 7.4% of the total supply. That means Binance could also do some damage to its FTX’s native token, FTT, if they decide to unload these tokens. That looks like what CZ and Binance plan to do directly or indirectly.

In a series of tweets released by the CEO of Binance, Changpeng Zhao (CZ), he revealed that his company was planning on liquidating the remaining FTT which it had in its books. According to him, this move is as a result of the “recent revelations” that have come to light. What revelations one could ask but that is by the side. He further revealed that the sale won’t be done at once due to the current market conditions and to reduce the market impact. CZ stated in the tweet that this move isn’t intended to hurt its fellow centralized crypto exchange FTX. However, one could question the honesty behind that statement as CZ and Binance could have chosen to close the sale ‘over-the-counter’ but fine, CZ claims the announcement was in line with his company’s policy to stay transparent in all its dealings. Besides being transparent, CZ has also managed to create FUD among FTT holders which has led to a massive sell-off with the token’s price declining following the announcement by CZ. 

Before CZ’s announcement, it looked apparent that Binance was about to dump its FTT tokens on the market. According to on-chain data, a crypto whale transferred 23M $FTT ($530M) to Binance yesterday suggesting a move to sell-off with the whale likely being Binance itself. 

That brings us to the million-dollar question: will FTT crash? Only time will tell. However, the tokenomics of the coin isn’t encouraging. The Top 50 holders of the $FTT token hold a total of 322.72M $FTT ($7.44B), accounting for 98.12% of its total supply. 

The token is highly concentrated in a small number of addresses. On one hand, that could suggest that the demand for the token is low, which would mean that no support can hold the token’s price once the whales begin to sell. The CEO of Almeda, Caroline Ellison, had in reference to CZ’s announcement tweeted that her company would “happily” buy all Binance’s FTT’s holdings for $22 but it seems unlikely that Almeda has that much cash lying around to stay true to its promise.

Is Almeda Research Insolvent?

These recent happenings also bring us to another million-dollar question: is Almeda Research insolvent? For now, there is nothing concrete as to whether or not the company is liquid enough to pay off its debts. However, the writings are on the wall, which may be what CZ was indirectly referring to when he mentioned “recent revelations” in his tweet. Is there something that we don’t know about? Could Almeda Research and FTX, by affiliation, end up bankrupt like the Celsius Network? A recent article by Dirty Bubble Media, a newsletter that has covered many shady elements of the crypto world in the past, suggested that Almeda was running a similar “flywheel scheme” to the one which bankrupted crypto lending company also adopted in its operations.  

On the other hand, Almeda Research’s CEO Caroline Ellison tweeted that Coindesk’s report only covered a subset of the company’s entities as they have more than $10b of assets that aren’t reflected in the report and that they “obviously” have hedges that aren’t listed in the balance sheet. However, anyone would question the integrity of these statements as she could say that the sky is “black” at this point to save her company from hot waters. 

Is Almeda insolvent? Only time will tell. 

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