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  • Writer's pictureSarah Dixon

FTX Registers Huge Outflows Amidst Growing Liquidity Concerns

Sam Bankman-Fried-led FTX exchange has seen a huge surge in withdrawals, leading to a substantial drop in its stablecoin reserves.

According to the available data, over $451 million in stablecoins has flown out of FTX over the past seven days. The exchange is under severe pressure amid growing but unsubstantiated rumors around the balance sheet of its sister firm, Alameda Research.

Huge Outflows From FTX

The past week has seen a considerable surge in stablecoin outflows from the FTX exchange, sparking concerns about the exchange’s financials. Market watchers also fear another Terra-like situation, as the exchange’s stablecoin reserves have substantially decreased over the past 24 hours.

According to Nansen data, the past seven days have seen $451 million in stablecoin outflows caused by significant user withdrawals. The data also shows that the FTX reserve is down over $300 million, with the balance sitting at $261 million. Another analytics firm, CryptoQuant, showed that the reserve is currently at $107 million. This could be considered an improvement, given that it had plunged by over 90% to $51 million.

Alameda Research Boosting Reserves

According to available data, the slight increase in reserves was thanks to Alameda Research buying and sending stablecoins to FTX from other exchanges. According to data from Lookonchain, Alameda Research has withdrawn nearly $500 million USDC from Circle and sent it to FTX since the 3rd of November. The firm also withdrew nearly $200 million USDC from Circle after CEO Caroline Ellison stated that the company is willing to purchase Binance’s FTT reserves at $22 each.

Jump Crypto And Nexo Leading Withdrawals

According to Colin Wu, firms such as Jump Crypto and Nexo are leading withdrawals, having made substantial withdrawals over the past 24 hours. Wu stated that Jump withdrew $40 million USDC from FTX, while Nexo withdrew over $90 million. Several crypto influencers have also been urging their followers to withdraw their funds from the exchange. Ran Neuner, the founder of Crypto Banter, stated on Twitter,

“I have nothing against FTX, but there is no upside to keeping funds on any exchange. More so on an exchange that has FUD. I’m almost sure FTX will be ok, but in the tiny chance that they are not, I wouldn’t want to think that I had an opportunity to withdraw and didn’t take it!”

Other users revealed that they have been experiencing delays in the processing of their transactions, while others stated that transaction fees were extremely high.

The Story So Far

The controversy began when reports emerged stating that Alameda Research held a total of $14.6 billion in assets and had around $8 billion in liabilities, including $7.4 billion worth of loans. Among its assets, Alameda Research listed that it had $3.66 billion in unlocked FTT, the FTX exchange’s native token. The concerns around insolvency arose from the fact that a significant chunk of Alameda’s holdings were in FTT, a token created by the firm itself, rather than in traditional fiat currencies or stablecoins.

Alameda Research’s CEO later clarified that the leaked document only presented a portion of the firm’s holdings. She added that the firm held a further $10 billion in assets. However, the clarification could not quell investor fears and prevent a response from the market. As the report found its way to more users, significant investors began pulling their funds from the exchange. The situation was further exacerbated by Binance when CEO Changpeng Zhao stated that the world’s largest exchange was planning on liquidating a significant chunk of FTT tokens. Binance had received around $2.1 billion worth of BUSD stablecoins and FTT as part of its exit from FTX.

Bankman-Fried Insists Everything Is Fine

FTX Founder Sam Bankman-Fried took to Twitter to assure users and investors that the exchange was functioning normally. He also called the rumors unfounded, adding that FTX maintains audited financials and is highly regulated. He also added that the exchange has already processed billions of dollars worth of deposits and withdrawals.

“FTX keeps audited financials etc. And, though it slows us down sometimes on product, we’re highly regulated. We’ve already processed billions of dollars of deposits/withdrawals today; we’ll keep going. (Taking up anti-spam checks to process more--sorry if you got those. We’re hitting node rate capacity, will keep going.) Also, tons of USD <> stablecoin conversions going on.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.


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