Already know why FTT is crashing but want to know how to secure your cryptos. The Ledger Nano S Plus hardware wallet is all you need to keep your cryptos safe.
FTT, the native cryptocurrency of the FTX exchange, has fallen over 90% in the last week. Previously a top 50 cryptocurrency by market capitalization, FTT is currently ranked 90th on Nov. 10, 2022. The following discussion will explain what caused the crash and what you need to know about the FTX exchange and FTT going forward. Here's why FTT is crashing and what you can do to avoid it next time.
What is FTT?
FTT — the native token of the FTX exchange — is a type of exchange token. It is designed to benefit FTX users while increasing the network effects of the platform. The price of FTT is largely based on the belief that the exchange will become successful, making its exchange token valuable to hold. As activity on FTX increases, it is expected to generate more demand for the exchange token (FTT).
The main benefit of FTT is a reduction in trading fees. Those who hold more than $100 worth of FTT receive a 3% discount when trading on the exchange. Generally speaking, the more FTT a user holds, the more discounts they’re entitled to. That is, until FTT started to crash
What Does FTX Do?
FTX is a cryptocurrency derivatives exchange launched in April 2019. The exchange offers futures and leveraged tokens on baskets of crypto and individual crypto assets, binary options and over-the-counter (OTC) trading. FTX is backed by Alameda Research, a trading firm that provides liquidity in cryptocurrency asset markets.
Why is FTT Crashing?
The FTT debacle started when Alameda Research’s balance sheet was leaked on Nov. 6, 2022. The majority of Alameda Research’s assets were reportedly held in illiquid altcoins, with the FTT token making up most of its assets.
The largest holding was made up of $3.66 billion of unlocked FTT tokens, while the third largest holding was $2.16 billion in FTT collateral. The remaining assets comprised $863 million in locked SOL, $292 million SOL, $134 million USD and $2 billion in equity services.
In response to the leak, Alameda Research’s CEO Caroline Ellison tweeted that Alameda had more than $10 billion of assets that weren’t displayed on the balance sheet, claiming that the specific balance sheet is for a subset of their corporate entities. Her response wasn’t enough to comfort investors. Alameda’s ratio of unlocked vs. locked crypto assets was too frightening.
Binance’s Involvement
Among the shocked community members was Binance CEO CZ, who announced that Binance was going to liquidate FTT tokens it received from FTX last year as part of Binance’s exit from FTX liquidity. “Due to recent revelations that have come to light, we have decided to liquidate any remaining FTT on our books,” CZ tweeted.
CZ’s tweet incited mass panic in the cryptocurrency market, a large reason why FTT started to crash. Having witnessed the Terra Luna situation, many investors also proceeded to withdraw their assets from FTX, which ignited a run-on-the-bank situation.
FTX executed around $6 billion in withdrawals in two days and eventually ended up halting withdrawals, exacerbating the downward selling pressure of FTT. Ellison and Sam Bankman-Fried appeared to react calmly and confidently following Binance’s statement, tweeting, “A competitor is trying to go after us with false rumors. FTX is fine. Assets are fine.” Ironically, the tweet is now deleted.
CZ responded to the mounting fear, uncertainty and doubt (FUD) by tweeting, “Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won’t pretend to make love after divorce. We are not against anyone. But we won’t support people who lobby against other industry players behind their backs. Onwards.”
As a large competitor to Binance, multiple rumors soon surfaced that Binance was going to rescue FTX through a takeover deal. However, after reviewing FTX’s internal data and loan commitments, Binance stated that it would not complete the proposed takeover of FTX.
How to Keep Your Cryptocurrencies Safe
Many experts are urging regulation that would stop exchanges from dangerous practices like those of FTX, mostly the mishandling of user funds and lack of transparency. This would likely eventually prevent another spiraling disaster like the one that led to FTT crashing but it's far from an immediate solution. Crypto investors need to take the security of their cryptos in their own hands as soon as possible.
Luckily, there are great ways to avoid this risk or at least heavily minimize it. Using a personal wallet is the easiest and most important step you need to take to secure your cryptos. Hardware wallets, simple devices that store and encrypt your wallet's private keys, are the safest option but software wallets like ZenGo and Exodus Wallet are also great secure choices. They have to connect to the internet so they are slightly less secure, however.
Best Hardware Wallet: Ledger Nano S Plus
Ledger has been the leading hardware wallet brand for seemingly forever. It offers 2 great models: the Ledger Nano S Plus and Ledger Nano X. The Nano S Plus is everything you need to secure your cryptos with incredible security and great ease-of-use. Ledger wallets support more than 1,000 different cryptos on all kinds of blockchains including FTT, Bitcoin, Ethereum, Ripple, Dogecoin, Stellar Lumens, Shiba Inu, all ERC-20 tokens and many more.
Will FTT Recover?
The situation is still unclear on whether FTX will be rescued. FTX was a huge player in the cryptocurrency — it was previously ranked as the fourth-largest exchange by volume according to CoinGecko.
The collapse of FTX poses multiple implications and regulatory challenges that still need to be addressed. As a result, the upcoming days are crucial for FTX, and users within the entire industry.
Cryptocurrency Market Outlook
The collapse of FTT added even more fuel to an already massive fire within the crypto space — igniting one of the deepest periods of realized losses ever recorded. Fear and pessimism are at unprecedented levels, which has resulted in many investors losing interest and exiting the cryptocurrency market. While the short-term consequences of the collapse of FTX are still unclear, it is safe to assume that it will take investors substantial time to heal and regain trust in centralized institutions within the crypto space. However, the community knows why FTT is crashing and likely how to stop it from happening again.
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