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FTX Token a “Deadcoin” with $535 Million Market Cap: Is FTT Size Sign of Hope or Naivety?

Last Updated May 20, 2024 12:21 PM
Teuta Franjkovic
Last Updated May 20, 2024 12:21 PM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • FTX Token (FTT) surged above $2 after the announcement of a creditor repayment plan.
  • Despite its association with the defunct FTX exchange and lack of intrinsic value, FTT still holds a $535 million market cap.
  • FTT’s price rose because of speculation and the potential for FTX’s restructuring to boost its value.

In May 2024, FTX estate announced that bankrupt exchange’s customers would receive more than 100% repayment.

In response, the now-defunct platform’s token, FTT, surged above $2. Remarkably, despite being linked to a failed crypto exchange, the token still boasts a market valuation of $535 million, which is surprising given its lack of intrinsic value.

FTT Continues to Trade Despite FTX Collapse and SBF Conviction

Despite being tied to the exchange, FTT continues to trade on several exchange platforms. FTX’s former CEO, Sam Bankman-Fried, was convicted and sentenced to 25 years for fraud in March. FTT played a key role in FTX’s fraudulent activities and contributed to the company’s collapse, due to FTX’s reliance on the token.

FTT's market cap stands at $535 million today, but on September 9, 2021, it soared to $9.75 billion.
Credit: Coingecko

Despite its involvement in market manipulation and deceptive financial strategies, FTT remains highly valued. The token is also highly centralized, with the FTX estate owning 69.06% of the total supply and Binance holding 9.51%.

Although there are 30,384 holders, the top ten wallets control 87.85% of the entire supply. Additionally, FTT’s tokenomics  have been compared to a pyramid scheme due to their questionable structure.

In the last month, FTT jumped over 20%. Although it dropped below the $2 it was worth in early May, FTX Token traded  at $1.59 at the time of writing (May 20).

FTT’s Farcical Distribution Balloons Market Cap Despite Dubious Value

FTT’s distribution has become a farce, particularly after the contract deployer unlocked the remaining supply. The token’s fully diluted market cap has ballooned to an improbable $535 million after the deployer, who controlled the so-called ‘locked funds’, released all remaining FTT tokens into the market.

Outside of its intended use on the FTX exchange, FTT holds little real-world value.

Despite its challenges, FTT still attracts investment from speculators, high-risk traders, and those hoping that FTX’s bankruptcy proceedings and potential restructuring might increase its value. Interestingly, even tokens like Celsius Network’s CEL , valued at $0.58, and Voyager’s VGX , trading at $0.077, maintain some market presence.

Over the years, many crypto projects have failed. However, the tokens tied to these projects often continue to circulate, often without any ongoing development or practical use cases.

How Did FTT Token Die?

FTT holders received significant discounts when trading on FTX. This was, essentially, a transfer from one pocket of SBF’s enterprise to another. Estimates from the timeframe of the balance sheet information indicated that Alameda Research, not FTX, controlled approximately 75% of the total FTT supply.

Infinite money diagram
Credit: medium.com/@quantclubiitkgp

The reason Alameda, rather than FTX, held the majority of the tokens, was probably to do with the ease with which Alameda could secure loans using the tokens as collateral. Lenders were presumably more hesitant to extend credit directly to FTX, given its complete control over the token. Although decentralized finance (DeFi) loans could get around this issue, it remains a significant concern for centralized finance (CeFi) loans. Alameda’s ownership of between 70% and 80% of FTT eventually raised substantial red flags, contributing to the collapse of FTX.

FTX Token Surges Amid Promising Rehabilitation Plan

After receiving positive news from its creditors, the seemingly inactive token’s trading volume increased. This was in contrast with the end of 2022, when the exchange declared bankruptcy. The rising prices of cryptocurrencies generally benefited FTX’s bankruptcy estate, which managed to capitalize by selling assets like shares in GBTC, its AI company Anthropic, and locked Solana tokens, thus providing a pathway to debt repayment.

Although some decisions, such as selling FTX’s stake and a token warrant in Mysten Labs for $96 million—which could have potentially fetched a higher price later—were questioned, the overall strategy proved effective.

FTX recently introduced a rehabilitation plan aimed at significantly reducing the losses of its creditors. Under this plan, creditors with claims of up to $50,000 should get 118% of their allowed claims. Also, other creditors look likely to be fully compensated, with additional billions of dollars going to delayed repayments. Specifically, around $5 billion to $16.3 billion has been mobilized to address these claims, attracting creditors whose recovery rates are now exceeding 100% on the dollar, with current valuations at 109%.

Nevertheless, it remains difficult to see what, if any, use FTT might have for its holders. Despite its recent bullish behaviour, in terms of its actual value, the FTX token looks suspiciously like a deadcoin.

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