Binance to dump entire pile of crypto token FTT, amidst fear of its sister fund going bankrupt

Binance has also been stung by a crypto heist, to which it lost $570 million last month.

FPJ Web DeskUpdated: Monday, November 07, 2022, 03:16 PM IST
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On paper cryptocurrencies seem like a secure investment vehicle encrypted using an electronic ledger blockchain and almost impossible to counterfeit, and all that is true. But these secured assets are being traded in a market marred by fluctuations and shadows, where a crash in values is as sudden as a spike, and dubious players are also scamming investors. Earlier this year, the collapse of stablecoin Terra and its sister token Luna sounded an alarm, leading to Binance’s recent decision of dumping its entire holding of FTT, which is rival exchange FTX’s native token.

So what’s the hysteria all about?

The Cayman Island-based exchange Binance founded by Chinese-Canadian Changpeng Zhao, has cited recent revelations about FTX’s sister hedgefund Alameda Research. The fund was said to be insolvent and headed for bankruptcy according to the reports, dispelled as rumours by the Bahamas-based FTX. But the shocking information has created panic among investors, who have started selling off FTTs, triggering a spike in outflows for the exchange. Seeing a risk on the horizon, Binance has opted to sell the FTTs it holds, and although the exact number of tokens isn’t known, it has $2 billion invested in the tokens.

Weighing risks and gains

Calling the move a post-exit risk management strategy, Zhao has said that FTX tokens will be sold by Binance in a way that it doesn’t impact investors. Hence the complete sell off of all FTTs held by Binance will take place over several months to come. Zhao has also confirmed that the transfer of FTT worth $584 million to Binance was part of the ongoing process to offload the tokens.

Not prepared for another blow

Zhao’s apprehension isn’t unfounded, since earlier this year, blockchain Terra’s stablecoin was dragged down when its sister token Luna crashed. The 80 per cent drop, which made the cryptocurrency worthless, also wiped out more than $200 billion of investors’ money.

Binance is also wary after it was hit by a crypto heist, pulled off by hackers who robbed $570 million from the exchange’s coffers.

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