The FTX-Binance troubles have continued and there has been a profound impact on the crypto market during this time. While Binance looks to be holding up quite nicely through all of this, the same cannot be said for the FTX crypto exchange. Over the last 48 hours, the exchange’s woes have been climbing as users show their displeasure with a bank run that has wreaked havoc on the exchange reserves.
FTX Reserves In Shambles
There have been whispers and rumors all across social media regarding the solvency of the FTX-owned Alameda Research. However, the real trouble started when Changpeng Zhao (CZ), CEO of crypto exchange Binance, said that the company had moved to sell all of its FTT token holdings.
FTT is the native token of the FTX crypto exchange and Binance received a healthy helping when it exited its investment in the exchange. In the announcement tweet, CZ said that the decision to sell had come after some findings had come to light regarding the operations of the exchange.
In the days following the announcement, FTX users had grown increasingly uncomfortable with the exchange, which led to a massive bank run. By the tail end of 48 hours, the Ethereum reserves of the exchange had plummeted by more than 90%.
Its ETH balances had gone from more than 322,000 to less than 32,000 in a matter of days. The decline was as sharp as the one being recorded in the price of the FTT token, which fell from $25 on Sunday to below $15 in the early hours of Tuesday.
FTX ETH reserves plummet | Source: SantimentWhat Happens If The Exchange Falls?
Now, FTX is one of the largest cryptocurrency exchanges in the space with millions of users so it remains highly likely that it will come out of this unscathed. However, if the exchange is unable to shake off the FUD (fear, uncertainty, and doubt) being generated presently, it could end up crashing.
A crash of exchange of the caliber of FTX would be nothing short of catastrophic for the crypto market. It will make the Terra (LUNA) collapse look like a walk in the park as it will not only drag market value down with it, it would erase years of trust and faith being built in the market.
FTX CEO Sam Bankman-Fried has already assured users that their funds are safe. According to him, the exchange does not invest any of the deposited user funds, and as such, has enough to cover all user funds. FTX has also reportedly continued to process withdrawals all through the bank run, although some users have reported slower withdrawal times and higher fees during this time.
FTT loses 30% of its value | Source: FTTUSD on TradingView.com
Featured image from CoinLive, chart from TradingView.com