The FTT cryptocurrency ensnared in the blowup of Sam Bankman-Fried’s empire still has a market value of $500 million, even though it has no obvious use.
That’s the token from the now-bankrupt exchange FTX, whose demise has cast a pall on the crypto space that industry participant say could take years to be lifted. The token reached a high of nearly $85 in September of last year, and though it’s seen its price drop roughly 98% since then, it still sports an eye-popping hypothetical market value on different exchanges and platforms.
“It’s a zombie coin,” Matt Hougan, chief investment officer of Bitwise, a crypto-focused asset manager, said on Bloomberg’s “What Goes Up” podcast. “If you look, there it is -- half a billion dollars of worthless money.”
Hougan posits that part of the reason the market value could look so inflated is that adrenaline-chasing day-traders might be dabbling in something that’s seen huge price shifts over the past week. But, more importantly, “people maybe can’t access most of it because it’s held on FTX exchange,” he added.
The sudden collapse of Sam Bankman-Fried’s FTX crypto empire has rocked the digital-assets industry, with prices of all manner of tokens plunging, and a number of firms coming down with it.
Earlier this month, news site CoinDesk reported on the balance sheet of FTX sister company Alameda, a trading firm, saying that a significant portion of its assets were in FTT, whose holders could get discounts on trading fees and other perks. In fact, FTX and its affiliated companies owned a big chunk of all the FTT in existence.
Binance, an FTX rival, also held a lot of the token thanks to a prior investment in FTX. Its chief executive, Changpeng Zhao, announced on Twitter that he’d be selling because of “recent revelations.” That sparked the crypto equivalent of a bank run. FTT on Thursday hovered around $1.50, Bloomberg data showed.
“If you put a true value on it, it’s got to be zero,” Chris Gaffney, president of world markets at TIAA Bank, said of FTT. “FTX locked everything, so I have to believe that’s just a function of having those locked up and not being able to trade. There’s no market cap left there.”
FTX is now in bankruptcy, with revelations of its inner workings during its last days slowly trickling out in a dramatic way through court filings. More than $300 million of FTT was minted by “an unauthorized source” following the bankruptcy filing, FTX’s new chief executive said in court papers Thursday.
The concept of a “market capitalization” can be murky in the crypto space as some projects can have a large number of tokens out -- and huge chunks of them can often be controlled by founders or just a handful of whales.
Read more: Think Crypto’s Real Value Was $3 Trillion? Try $875 Billion
But FTT might be attracting investors with a mentality, said Max Gokhman, chief investment officer at asset manager AlphaTrAI, who said that it was reminiscent of traders buying shares of Hertz Global Holdings Inc. after it filed for bankruptcy during the pandemic.
“There is a tendency for traders who don’t understand risk management to throw good money after bad,” he said. “In crypto that mentality is even more deeply ingrained, as in the notion of comeback stories. Plus, very few folks in the space were even around when Enron went down -- so they’re treading through unfamiliar territory with perhaps too much optimism.”
For cryptocurrency prices, see CRYP
— With assistance by Muyao Shen, Michael P. Regan and Jeremy Hill
