The situation with Bitcoin and other cryptocurrencies has gotten really complicated. For example, this is what the BTC exchange rate chart looks like over the past 24 hours.

Bitcoin exchange rate chart for the last day

And here are the results of changes in rates of top coins by market capitalization over an hour, a day and a week.

Situation in the cryptocurrency market today

Note that Solana SOL experienced one of the biggest collapses in a day - and there is an explanation for that as well.

However, to understand the situation, you need to recall the recent events that we described in a separate article. The day before:

• A financial report by Alameda, a trading and investment company close to FTX chief Sam Bankman-Friede, was leaked online. It made it clear that the company holds about 25 per cent of its own assets in FTT, the FTX exchange’s native token;
• Alameda Research CEO Caroline Allison clarified that the report is inaccurate and the company has at least $10 billion more in assets. And the company has already paid off most of its debts;
• Despite this, Binance chief executive Changpen Zhao announced the company’s decision to sell all of the FTT tokens in its possession. The coins amount to hundreds of millions of dollars;
• Caroline Ellison offered to buy back all FTTs at $22, which at the time was about 10 per cent below the market price;
• the blockchain community questioned whether Alameda had the resources to buy all the FTTs. However, there was no clear evidence of that – except for the fact that FTX reserves in Stablecoin fell to a historic low of $51 million.

Stablecoin reserves on the FTX cryptocurrency exchange

The important point here was that Allison offered to buy all the FTTs in stock at exactly $22. Now on to a breakdown of the fresh situation.

What’s going on with Bitcoin and cryptocurrencies

FTT is an important asset for both FTX and Alameda. After all, for the former it is a native token, well Alameda holds a huge portion of its assets in FTT. As analysts suggest, given the latter fact, Alameda traders could use FTT as collateral for leveraged cryptocurrency trading.


Well that creates liquidation risks on various exchanges. In other words, if the FTT sags below a certain level, Alameda's positions could be liquidated. Consequently, it is crucial for the company to keep the token above an unnamed threshold.

Recall that legendary crypto fund Three Arrows Capital, which once managed billions of dollars in assets, collapsed due to liquidation of positions. In other words, the risks here are quite serious.


That makes Caroline’s proposal to buy FTT seem logical: a gradual shedding of the token’s huge holdings could lead to a significant collapse in its value. And that poses a risk to Alameda’s position.

As a result, after Changpen Zhao announced that all FTT stocks had been sold by the Binance exchange, the token price began to fall. Investors apparently decided to hedge their bets and disposed of the crypto-asset bit by bit, not wanting to go through any potential problems. The FTT exchange rate over the last 24 hours looks like this.

FTT exchange rate chart for the last 24 hours

The token was valued at $22 in the morning, but within two hours, the asset failed to withstand the sellers’ pressure and collapsed to a minimum of $15.


This situation is a huge risk for Alameda, which could face liquidation. How should a company, which is dependent on the price of a particular asset, act? Most likely, sell other assets at its disposal and buy the right coin - in this case, FTT.


Larry Chermack of The Block has come to a similar conclusion. Here’s his rejoinder from Twitter.

I agree about what’s happening with FTX, however, I was a little surprised by the volume of crypto assets that Alameda is moving to FTX, Binance and Genesis. And SOL is absolutely clearly selling off to protect the $22 level for FTT. This is not a good scenario for Alameda.


Transfers to exchanges in this case mean selling assets to get liquidity, which is then diverted to buy FTT. Well, there is more than enough SOL at Alameda's disposal, so the company has taken to selling Solana cryptocurrency. This explains the serious SOL drawdown that we highlighted at the beginning of the article.


Larry then asked an equally interesting question. Here is his rejoinder.

The question here is whether the $22 level [to buy all FTT tokens from Binance by Alameda representatives – editor’s note] is important for reasons other than pride. My guess is that it is. So the question to ask here is how long they can hold it, and what happens if they can’t do it anymore. My guess is that in that case Sam will back them up, but not for sure.

FTX CEO Sam Bankman-Fried

FTT then collapsed below $22. However, Larry made it clear that there could be serious problems for Alameda in this case – including if the FTT rate collapses and lingers at this level.


Recall that UST's prolonged decoupling of the "stabelcoin" from the dollar has provoked disaster for the Terra ecosystem. At that time, the project representatives also tried to sell their own assets to support the coin's exchange rate, but failed to do so.


What happens to FTT at the Binance exchange

The story does not end there. Last night, Binance chief Changpen Zhao made it clear that he would prefer to sell his own FTT on the “open market” rather than through a so-called OTC deal with Alameda.

The db page writer first asked if Chanpen wanted to exchange the FTT in their possession for the equivalent of $580 million in BNB. This amount was mentioned by Zhao, so the exchange most likely has exactly that amount of FTT tokens. Changpen responded with the following quote.

I didn’t say that. It was a question, not a commitment. I think we will stay in the open market. Still, we are still holding LUNA (now LUNC) up to today.


So Chanpen has made it clear that they are willing to hold FTT even if the token depreciates, as happened with LUNA. For now, however, they will get rid of FTT on the open market, Decrypt reports.


However, a deal could still take place. A corresponding FTT transfer of the equivalent of almost $43 million to the FTX exchange this morning was brought to the attention of a Twitter user nicknamed Hsaka.

Possible confirmation of OTC deal between Alameda and Binance on FTT

This could in theory mean that the FTT purchase deal between Binance and Alameda representatives could have taken place. Consequently, further token flush is theoretically not a threat to the latter, which means that Alameda seems to have no need to actively dispose of assets in order to save FTT. However, right now the token is still trading at $17, which is markedly down from the $22 level.

And where did the possible rivalry between Sam and Chanpen come from in the first place? It turns out that in late October Bankman-Fried published a tweet in response to this post. At the time, he stated that Zhao could represent the cryptocurrency industry and communicate with regulators in Washington in the same way that Sam does. However, Bankman-Fried then queried whether Changpen would be allowed in there at all.

Sam Bankman-Fried’s deleted tweet criticising Changpen Zhao

This tweet was deleted eight days later, but Zhao must have found out about it. However, there are other reasons to sell FTT.


Meanwhile, the cryptocurrency industry finds itself in a difficult situation. On the one hand, an OTC deal could happen, which means that Alameda should now not be so afraid of FTT's flush and possible liquidation. On the other hand, FTT is still trading very cheap, which in theory creates risks for the company and forces it to get rid of other assets to buy more coins and increase the rate. Well, that collapses the rest of the market and creates liquidation risks for other players.

How this will end is unknown. However, the resolution of the situation will clearly be accompanied by serious volatility.


What do you think about what is happening? Share your opinion in our Millionaire Crypto Chat. There we will talk about other important topics affecting crypto.

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