For all the snarky memes that flooded Crypto Twitter when Binance announced it would and then wouldn’t buy FTX, it was still left holding a bag: 5% of the total FTT supply, now worth only $65 million.
FTT is the native utility token for the FTX exchange, which grants holders trading fee discounts. It functions like a customer loyalty program. The more a user owns, the bigger the discount they get on their FTX trades. Or at least, that’s how it used to work.
A person familiar with Binance’s due diligence of the FTX deal told Decrypt that the exchange was able to sell very little of its FTT before announcing that it had backed out of the FTX deal. The FTT that used to be worth $580 million on Saturday, when Binance initially set off alarms by moving it, would now be worth $89 million.
Trouble started for FTX last week after Coindesk reported that at least $5 billion of Alameda Research’s $14 billion balance sheet was FTT. Both FTX and Alameda were founded and are owned by FTX CEO Sam Bankman-Fried, but he has always maintained that the two entities were separate.
The news prompted Binance to begin liquidating its FTT position, which was then followed by a rush of retail investors and traders attempting to do the same. The run tanked the price of FTT and resulted in a liquidity crunch for FTX from which it ultimately could not recover.
Binance wound up with a big FTT position because FTX used it and stablecoins to buy out Binance’s share of equity last year. Binance decided to exit its equity position after a lot of strong disagreements and concerns over its competitor’s relationship with Alameda Research, the source familiar with the deal said.
At the moment, the wallet that Binance’s FTX tokens were transferred into still has 17 million FTT, worth approximately $65 million at the time of writing, according to Etherscan. Binance’s position represents a 5% stake in the total FTT supply.
In the past week, FTT’s price has dropped by 85%, going from $24.39 to $3.80, according to CoinGecko.
The token, which usually does between $50 million and $100 million in daily volume, skyrocketed to $1.6 billion in volume the day after Binance CEO Changpeng Zhao confirmed that the exchange was selling its FTT. It ratcheted up again, to $4.4 billion of volume on Wednesday, when Binance announced that the deal was off.