FTX’s FTT token fell again. While its recent decline hasn’t been quite as catastrophic as last November when the crypto empire of FTX founder Sam Bankman-Fried quickly collapsed, the current stumble is still tied to the exchange’s existence (or absence).
The token offers investors reduced trading fees and other benefits when trading on FTX almost doubled yesterday after the exchange’s top bankruptcy attorney, Sullivan & Cromwell, mentioned the possibility that it might one day reopen.
“All options are on the table, but we don’t have a specific path at this time,” Andy Dietderich said in response to questions from Judge John Dorsey about restarting the exchange in a Delaware district court.
Raising capital
Dietderich said a business restart, whether on FTX’s international exchange or one tailored to US investors, will likely require raising capital. He also noted that there are questions about whether the bankrupt should use their own money to fund a potential reboot or seek out third-party resources.
A possibility mentioned by Dietderich would be to allow affected FTX customers to transfer some of the funds they eventually recovered to “receive some future exchange interest.”
The token rose from $1.32 to $2.63 following the attorney’s statement. But almost as quickly as it rallied, FTT fell back to $2.04, losing nearly 19% in the past day, as stated by CoinGecko.
The rise resembles traders’ reaction to current FTX CEO John J. Ray III’s statement in January. The token hit $2.37 after Ray said he appointed a team to explore the recovery of the exchange’s international branch.
BlockTower Capital’s Chief Investment Officer and Managing Partner, Ari Paul, dismissed the idea that FTT would have any value in reopening FTX in a tweet on Thursday.
He wrote “It is extremely unlikely that the FTT token has any relation to FTX again for myriad reasons,” he wrote. “FTT tokens are probably just ‘collectible’ now.”
Paul explained that the token probably won’t be involved in any exchange’s reincarnations due to potential liability. At the same time, it makes no sense to place value on TTF holders who have no legal connection to the bankrupt exchange, he said.
Paul’s comments were in response to a tweet from Delphi Labs General Counsel Gabriel Shapiro, who said: “If you think FTT will play some role in FTX 2.0 besides the potential liability of SEC, then you’ve done brain damage.”
The majority of the token’s trading volume took place on Binance in the past day, representing 66% of the total volume tracked by CoinGecko, worth over $160 million. The other most active FTT trading sites are Gate.io and XT.com, which have a combined volume of around $50 million.
While yesterday’s nearly 100% gain seems impressive, the token is still down more than 97% from its $84.18 all-time high, set in September 2021.
FTX was filed for Chapter 11 bankruptcy last year after a massive drop in FTT caused a wave of FTX customer withdrawals, ultimately revealing that the exchange did not have enough customer asset reserves to deal with the massive cash flow of traders.
During the course of two weeks in November last year, the token fell to around $1.50 from around $26. The value of the token started to decline after CoinDesk reported that FTT was a key part of the balance sheet of Alameda Research, a trading firm co-founded by Bankman-Fried before FTX was founded.
By Marina Meza
