Isn't FTT like FTX's own issuing tokens? It's like printing one's own money. But when the backing firm fails, the printed money is worthless, just like what LUNA issued by Terra had become.
Just went over the issues on the balance sheet of Alameda Research, which is SBF's trading company.
Of the $14.6 billion assets Alameda manages, almost $6 billion is FTT based. Alameda has heavy investment in Solana, Serum, and other alt-coins. It looks like the drop in their value has lowered Alameda's asset balance. Alameda borrowed FTT tokens from FTX to put them as assets in the balance sheet to shore it up. The size of the asset balance is probably used to obtain loans and liquidity.
FTX issues FTT tokens (print money) => lends to Alameda to put under the asset balance => Alameda borrows money from outside against its assets or uses the asset/coins to invest in others => win with thin air!
The crashing of the FTT token not only tanked FTX, it's going to tank Alameda Research as well since its asset balance suddenly shrunk and might have liquidity problem.
The tanking of Alameda is going to another Three Arrow Capital event since Alameda invests in lots of other cryptos. It might be forced to liquidated those investments. Expect another bloodbath in the crypto space.
> Of the $14.6 billion assets Alameda manages, almost $6 billion is FTT based.
When that info was seemingly accidentally revealed, the spicy little nugget in there that made people sit up & notice was that the entire market cap of FTT tokens was well below the reported asset value of the tokens on the balance sheet.
1. We don't know what the lending basis for FTT from FTX vs the claimed value of FTT on Alameda's book. FTX lent FTT at $10 to Alameda and then FTT inflated to $50 would mean Alameda has $50 asset vs $10 liability.
It's reported that Alameda Research has $14.6 billion in assets and $8 billion in liabilities. Some claim that Alameda's assets are "entirely illiquid." Nobody knows how bad things are. The only thing is that FTX has stopped the withdraws.
2. Loans for long term and liquidity for short term? Like overnight lending.
1) What is that replying to? I was asking why the borrowed FTT would make them more capable of getting loans if it came with a corresponding liability. That would only make sense if lenders didn't care about the liability balance sheet, which is ... non standard.
Edit: That is, you said the "size of the asset balance" is used to obtain loans. That makes it sound like merely increasing assets -- even if they come with liabilities, makes them more capable of getting loans.
There are DeFi protocols where you can lock-up crypto assets (eg FTT) and use those locked assets as collateral to borrow another crypto asset (eg ETH). That all happens "on chain" and there is no way for the protocol to know if there are corresponding balance sheet liabilities.
I don't know what the OP was referring to, and I don't know if this is what they were doing, but something like this could happen.
Right, but those are generally going to be on worse terms than you can get in a negotiated loan from someone who knows your entire business. So it doesn’t make much sense to negotiate an FTT loan and then use that as collateral for a less-informed loan from a smart contract.
It would be like getting a personal loan from a bank, buying jewelry with it, and then using the jewelry to get a pawn loan — a dubious strategy, since the terms on the first loan are going to be much better.
> FTX issues FTT tokens (print money) => lends to Alameda to put under the asset balance => Alameda borrows money from outside against its assets or uses the asset/coins to invest in others => win with thin air!
The Federal Reserve issues US dollars (print money) => US Treasury borrows money from The Federal Reserve, Japan, China and the UK against its assets or uses the asset/coins to invest in others => win with thin air!
> The Federal Reserve issues US dollars (print money) => US Treasury borrows money from The Federal Reserve, Japan, China and the UK against its assets or uses the asset/coins to invest in others => win with thin air!
Win with the largest military in the world and all tangible assets and influence the US has.
This is actually... extremely apt. It is commonly referred to technically as the dollars exhorbitant privilege. It would seem FTX managed to exploit this phenomenon on a micro scale. Until it didn't of course lol
It only matters if FTX was using FTT as a collateral for accounting purposes for a valuation that is not realistic considering the liquidity of a position size.
Yeah. I can't be bothered to verify, but i remember that Binance has a huge double-digit percentage of all FTT tokens in circulation. Dumping all of them would crash the tokens value. And since this is FTX's own token, they would hurt a lot, maybe even terminally.
