Open Interest in FTT Futures Doubles as Binance Moves to Liquidate FTX Token Holdings

Key points: 

• According to data from CoinGlass, the amount of open interest on FTT-related futures and perpetual futures has more than doubled since morning trade in Asia.
• According to Matrixport Technologies, funding rates have fallen sharply to an annualized -36%.
• The combination of rising open interest and negative funding rates suggests that traders are shorting FTT.
• According to crypto exchange Phemex, Alameda owns more than 50% of FTT tokens, and the continued decline in cryptocurrency prices could have an impact on the market as a whole.

Traders rushed to hedge against a potential decline in FTT, the native token of crypto exchange FTX, following Binance’s decision to liquidate FTT holdings and a dispute over Alameda’s balance sheet.

According to data from CoinGlass, the amount of open interest or the dollar amount spent on FTT-related futures and perpetual futures has more than doubled since morning trade in Asia, from $87.56 million to $203 million, reaching high of 12 months.

According to Matrixport Technologies, funding rates, or the cost of taking a bullish long position or a bearish short position, have fallen sharply to an annualized -36%. A negative funding rate means that shorts or bears have the upper hand and are willing to pay longs to hold their positions.

The combination of rising open interest and negative funding rates suggests that traders are shorting FTT.

"FTT's annualized funding rate has fallen to -36% as open interest has doubled. It seems like a lot of new shorts have been created," said Markus Thielen, head of strategic research at Matrixport. “The volume of the FTT spot market increased from $58 million to $3 billion.”

Griffin Ardern, a volatility trader at crypto asset manager at Blofin, said: “Last week, Alameda’s balance sheet came into question and Binance also announced that it would liquidate FTT and other assets associated with the FTX exchange. This appears to have prompted the decision to hedge FTT. Investors in other assets panic.”

“FTT holders need to stop losses by shorting violators,” Ardern added. The coin was down 4% to $22 at press time, according to Btcman data.

On Sunday, Binance CEO Changpeng Zhao tweeted that he would liquidate the remaining FTT tokens he acquired as part of last year’s exit from Alameda’s sister company FTX.

“Due to the recent exposure, we decided to liquidate all remaining FTT on our books,” Zhao tweeted, citing a report on Alameda, which is worth $3.66 billion on its balance sheet.

"The resolution of our financial transaction tax is just to learn from LUNA about post-exit risk management," Zhao added.

Terra’s LUNA token (now known as LUNC) crashed in May, destroying billions of dollars in investor wealth.

According to crypto exchange Phemex, Alameda owns more than 50% of FTT tokens, and the continued decline in cryptocurrency prices could have an impact on the market as a whole.

“If prices drop, Alameda will be the only buyer. The key point is that despite the recent surge in cryptocurrency prices, if another potential big-name player receives a margin call in late 2022, there may be fear of a LUNA-type situation could reignite," Phemex said in a daily market report.