The impact of the FTX event: the market and subsequent risk prediction
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1. Event review
The FTX incident seems to have entered a new phase on November 9th, and what happened in the past 24 hours will almost certainly be etched in the history of the cryptocurrency industry. The following is the current situation of the incident. We hope to let readers understand the whole picture of the whole thing through some key figures:
1) On November 2, Coindesk broke the news that Alameda's balance sheet has great hidden dangers, and about 6 billion of the total assets of 14.6 billion US dollars are FTT and SOL.
2) On November 6, CZ tweeted that it will gradually sell the FTT held by about 23 million US dollars. After the news came out, FTT began to fall, and after the Alameda CEO expressed his willingness to receive the FTT that CZ wanted to sell at a price of $22, the price stabilized around $22. However, in just two days, nearly $1 billion in assets have flowed out from FTX and Alameda.
3) At 11:00 on November 8 (UTC+8), it was rumored that FTX sold 100 million bits and other tokens it held to replenish liquidity. As a result, FTT fell to $16 at one point. However, on the afternoon of the 8th, several hot wallets of FTX did not transfer out coins for 2 hours, which further caused panic, and FTT led the market to continue to explore.
5) At 2:00 on November 9, the U.S. Commodity Futures Trading Commission stated that it was monitoring Binance’s acquisition of FTX. And there are voices that the rapid acquisition may be due to the relatively cheap acquisition amount, which will cause losses to FTX’s previous investors and may violate the anti-monopoly laws of various countries. These voices have triggered concerns about whether the merger can be completed in the market. To make matters worse, SBF stated in an internal letter to the company on Tuesday morning that $6 billion had been withdrawn from FTX in the past three days, which made the market realize that FTX’s funding gap exceeded previous expectations. At 8:00 on November 9th, FTX suspended all cryptocurrency withdrawals. This series of events led to a further collapse of the market. So far, the price of FTT has fallen below $5, BTC has fallen below $17,000, and ETH has fallen below $1,300. At present, the number of stablecoins in FTX's wallet has dropped by more than 80%, and it is currently less than 200 million US dollars, and there are less than 40 BTC.
2. FTX event impact range and follow-up prediction
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2.1 Impact of the FTX event
The impact of this FTX thunderstorm event may go beyond the scope of institutions that were implicated but not bankrupt during the previous Luna and 3AC crashes, and will affect all corners of the industry. Institutions that continue to participate in the lending of FTX in this round have huge potential liquidation risks. We can understand the impact of this event from three levels:
a) Direct impact layer: projects directly invested by FTX and Alameda and centralized institutions that have direct loans and partnerships with FTX. The project level mainly includes important public chains and DEXs including Solana, Fantom, and Serum. As shown in the table below, these are the direct victims of the FTX thunderstorm incident.
We have analyzed Alameda’s assets. Currently, Alameda’s monitorable wallets hold top-ranked tokens by value as follows: BIT, SUSHI, FTT, SRM, LDO, MATIC, RNDR, etc.
BIT: At present, it is impossible to confirm whether it will be unlocked against its promise. FTX promises not to unlock, but the value of bit in the Alameda wallet has reached 23%, and the market confidence is insufficient. It is a high-risk currency
SUSHI: There are a total of 3.4 million xSUSHI in Alameda, and 4.8 million SUSHI can be proposed. However, the price of large-value liquidation on the SUSHI chain is very low, and it is expected to be unreachable. It is relatively safe at present. At present, it is mainly the market's fear of Alameda's huge holdings that leads to lack of confidence.
MATIC and RNDR: They have strong liquidity and are not SOL-based assets. There is a high probability that they will give priority to selling back funds. RNDR has fallen by 26%, and MATIC has fallen by 20%. If the tokens in the balance are transferred to the exchange, they will continue to fall.
FTT: The platform currency of FTX itself. It is said that Alameda also borrowed a lot from FTX and used it as collateral. However, loans and loans do not exist on the chain, and there is no way to know the specific liquidation details. Based on collateral, the FTT token price is favorable for Alameda, possibly as a last resort.
SRM: Among them, FTX and Alameda have a close relationship, and the relationship has always been very close. At present, the price of the currency has broken badly. Like other protocols on Solana, TVL has fallen by 20%-30% in 24 hours.
SOL: There is a large amount of asset liquidation risk on the chain. A large chain currently has 2,095,598 SOL (worth more than 38 million U.S. dollars) as collateral and 48,038,000 USDC in debt. If the oracle machine is restored, it will trigger liquidation and cause a sharp drop in prices.
As for organizations that have business connections with Alameda, there is currently no public information to confirm, but they must exist.
a) Indirect impact layer: projects where Alameda acts as a market maker and equity replacement, or projects that are heavily bound to assets such as FTT, such as bitDao, MIM, etc. Although these projects do not have FTX's investment, they have in-depth business relations with them and will be greatly affected under the current circumstances.
In short, during the three years since the rise of FTX, as the second-ranked centralized exchange, its tentacles have penetrated into all aspects of the industry, and we have been unable to fully quantify how many projects this event will cause losses. , but it can be qualitatively said that compared with the luna incident, the FTX incident is the Lehman incident in the currency circle.
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2.2 Follow-up market and progress forecast
a) From the market point of view, before the FTX thunderstorm, the market was already in a relatively deep bear market. With the tightening of macro-monetary policy and events such as luna and Three Arrows Capital, BTC fell all the way to $18,000. However, in recent months, although the Fed’s continuous and substantial interest rate hikes have tightened the macro environment, the overall market has entered a relatively stable stage. BTC not only held the $18,000 mark, but also slowly rebounded to around $21,000. Seeing that the peak of interest rate hike is about to pass, the collapse of FTX made the market turn all the way down, BTC once again fell below $17,000 and ETH fell below $1,300. The last time I saw BTC around $17,000 was in November 2020, two years ago. Therefore, it can be said that apart from the proven $18,000 mark that has been supported for five months and can be trusted, the prices below it are currently not very credible, and the market has not reached a consensus on the next key point.
4. The information, opinions and speculations contained in this report only reflect the judgment of the researchers on the date of finalizing this report. In the future, based on industry changes and updates of data information, there is a possibility of updating opinions and judgments.
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