FTT crypto value: Why is FTX native token still not worthless?
Updated
The ftx token (FTT) has plummeted in price during the past week as the cryptocurrency exchange has been thrust into crisis mode during a liquidity crunch, which eventually led to it filing for Chapter 11 bankruptcy.
FTT is the native token for the FTX exchange and is primarily used as a payment source for trading fees. It also gave holders exclusive benefits, including staking rewards and discounts. But the token has lost this utility after the bankruptcy of FTX.
The exchange token has faced great sell pressure in recent days, which followed news that FTX customers are no longer able to withdraw funds. Surprisingly, it has shown some resistance.
FTT to USD
Trading fees and burn
The FTX trading fees could be responsible for the token’s resistance to the bears. Implemented in its tokenomics from day one, FTX has used 33% of all trading fees to buy and burn FTT tokens.
These are usually burned every week, but FTT has not recorded the recent burn that was scheduled for 7 November.
At the time of writing, over $13m worth of tokens are set to be burned, according to its website. This gives FTX a total trading revenue of more than $39m since 31 October 2022.
These trading fees are almost $30m more than FTX experienced in the period between 25 and 31 October.
The withdrawal exodus
This spike in trading fees followed an overwhelming surge of withdrawals on the cryptocurrency exchange. More than $5bn was cashed out from FTX on 6 November 2022.
Since then, withdrawals have been reduced to a drastically lower pace as FTX faced liquidity troubles. During a brief period, withdrawals were even halted by the bankrupt exchange.
However, FTX announced it was disabling the withdrawal function as the exchange starts its bankruptcy procedure.
The new CEO John Ray said via the Twitter of FTX general counsel Ryne Miller: “We are in the process of removing trading and withdrawal functionality and moving as many digital assets as can be identified to a new cold wallet custodian.”
We hope this is just step one: beginning to find ways to bring liquidity to users.
— SBF (@SBF_FTX) 10 November 2022
That is the core thing that I am fighting for right now, and will continue to fight for in whatever ways I can. https://t.co/pzTJBsytVS
FTT’s price action
Earlier this week, as the week’s events began to unfold, FTT’s price experienced a stark fall. After starting the month around the $25 mark, FTT plummeted to a low of $2.06 on 9 November.
It recovered slightly and climbed above the $3 mark on 11 November. But it soon plummeted the same day. This was after FTX announced its bankruptcy and founder Sam Bankman-Fried resigned from his position as CEO.
At the time of writing, FTT was trading at $1.88 and had crashed by 92% in the past month
FTT has also fallen out of its in the top 100 cryptocurrencies. With a market capitalisation of $619m it was ranked 209th at the time of writing.
The surges in withdrawals and subsequently trading fees could be the cause behind FTT’s initial resistance. However, it could struggle to keep this momentum in the long-term, as there is still the possibility that customers could begin to migrate off the exchange en masse after its bankruptcy announcement.
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