Users Flee FTX? Exchange Sees 47% Drop In On-Chain Balance

The crypto industry is witnessing a new war between exchange giants FTX, led by Sam Bankman-Fried, and Binance-led Changpeng “CZ” Zhao. Rumours have circulated that the ex-exchange was insolvent with an inliquid balance sheet. 

Binance’s CEO is rumored to be making speculations. During the weekend, CZ expressed concerns about “recent revelations” around FTX. Binance, which invested FTX in 2021, received approximately $2 billion in BUSD and FTT, a Bankman-Fried support token. 

Binance is now going to liquidate its FTT tokens as well as any equity or participation it may have in its rival. CZ speaks frequently about how different parties are working together to build the cryptocurrency industry. The executive is now in a different place. via Twitter CZ wrote:

It isn’t a conspiracy to take down a competitor. Our industry is in it’s nascency and every time a project publicly fails it hurts every user and every platform (…).

Running the FTX bank

Despite CZ’s statement, the decision is considered part of a “Bank Run,” when many customers withdraw their money from a financial institution leading to insolvency, against the Bankman-Fried led FTX. This strategy appears to be working. 

Dune Analytics data shows that the 24-hour NetFlow for FTX was negative. Also, tokens are being withdrawn more often than they are being deposited. It has received netflow of $26 million, a decrease of 26%. 

Below is the chart showing that the netflow was led by USDC stablecoin. With rumors about insolvency, this metric tended to trend downwards. Bank Runs worsen in longer periods of time. FTX recorded -$86million weekly netflows, and -$230million within 30 days.

FTX FTT BNB War chart 1
FTX Daily Netflows Source: Dune Analytics

Binance started its attack against FTT. The token has been following the general sentiment in the market, but now it’s experiencing further selling pressure. 

FTT FTX BNB price
FTT’s price trends to the downside on the daily chart. Source: Tradingview FTTUSDT

This is why Binance will take the short-side trade in a crypto bearmarket. Who would have thought that they might also choose to take the long-side? FTT looks set for more losses in the coming month. 

Sam Bankman Fried Clears The Air

Via Twitter, Sam Bankman-Fried addressed recent events claiming that a competitor is trying to attack them with “false rumors.” In that sense, the executive assured his followers that FTX is “fine” and solvent. Bankman-Fried wrote:

FTX is able to pay all clients’ holdings. We don’t invest client assets (even in treasuries). Since 1998, all withdrawals are processed by us. It’s heavily regulated, even when that slows us down. We have GAAP audits, with > $1b excess cash. Our long-standing tradition of protecting client assets is still evident today.

Bankman-Fried called on CZ to work on a compromise and try to “work together for the ecosystem.” Binance is yet to reply, but CZ seems adamant in his position.

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