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Even if FTX has stopped withdrawals, it does not necessarily mean they are insolvent. But remember, no smoke without fire. Like all other financial institution

Even if FTX has stopped withdrawals, it does not necessarily mean they are insolvent. But remember, no smoke without fire. Like all other financial institutions, they can process only certain amount of withdrawals in a time frame, limited by their banking partners and so on. Currently their are under enormous pressure, as their competitor Binance has decided to dump very large amount of $2B FTT token they received as part of the exit from FTX equity round where they were a seed investor. This will put FTT price under pressure and people correlate this price with the integrity of FTX. Also, FTX associated entities have loans collateralised by FTT tokens, so if the collateral value falls too much the loans are liquidated. Based on the FTX user agreement, this should not have effect on user deposits, but might have negative effects on other FTX associated entities like Alameda the quant trading desk. The fear is causing everyone to withdraw from FTX and this has then clogged their withdrawal capacity. Generally, if Binance would not have been hostile, they could have dumped their FTT tokens with less effect on the markets. They chose not to do so and telegraphed their dump very openly. This does not reflect well on the crypto industry as general. We will find out very soon. Note that this kind of issues do not happen on decentralised exchanges (DEXes) where any reserves are transparent and smart contract controlled.

janmo 4y ago
Well it has been 4 hours now, and the media has been reporting it for an hour, everyone on Twitter and Reddit is talking about it. Yet, no communication from FTX or SBF.
- kobalsky 4y ago
  > Yet, no communication from FTX or SBF. this is the biggest issue. if they are having any kind of technical issues they should be on top of it. even if everything is fine by tomorrow and withdrawals are working again, this radio silence is unprofessional and at this point it feels like they are trying to avoid saying anything that will be held up in court against them.
  - toomuchtodo 4y ago
    Even strong denial can cause a run. See Credit Suisse as the most recent example. https://www.google.com/search?q=credit+suisse+insolvent https://www.google.com/search?q=credit+suisse+insolvent
  - amluto 4y ago
    If indeed the issue is that the hot wallet is empty and funds need to be transferred from the cold wallet, they could say so.
somuchfordonor 4y ago
> Even if FTX has stopped withdrawals, it does not necessarily mean they are insolvent. Listen to yourself.
- Scoundreller 4y ago
  I’m still trying to decide if stopping withdrawals is smoke, or is the fire.
  - joyfylbanana 4y ago
    It is fairly common for exchanges to have (short) pauses in withdrawals. The majority of funds are in a cold storage, and for security reasons it usually takes some time to get the funds out from there "live". If lot of people are withdrawing at once, it would cause minor inconvenience to any exchange. They have to transfer funds from cold storage, and that takes time. It is almost impossible to determine if an exchange is solvent or not until you know their cold storage addresses.
    - Scoundreller 4y ago
      Stopping withdrawals is definitely a fire if cold storage addresses are a mystery.
  - asdajksah2123 4y ago
    The cryptocons will assure us that it's actually unicorn farts.
  - somuchfordonor 4y ago
    Well it turned out to be fire.
- 323 4y ago
  If the ATM Cash Machine stops withdrawals because it's out of money it doesn't mean that the bank which owns it is insolvent. Even if you go to a bank branch, large withdrawals ($100k+) need to be announced days in advance, they will not give you the money on the spot.
pgwhalen 4y ago
> Even if FTX has stopped withdrawals, it does not necessarily mean they are insolvent. Update, FTX is insolvent: https://twitter.com/cz_binance/status/1590013613586411520 https://twitter.com/cz_binance/status/1590013613586411520
snapcaster 4y ago
>Generally, if Binance would not have been hostile, they could have dumped their FTT tokens with less effect on the markets. They chose not to do so and telegraphed their dump very openly. This does not reflect well on the crypto industry as general. We will find out very soon. I think this is a good thing. Companies overleveraging themselves like this _should_ be punished or at least have the risk of this happening hanging over them. FTX tried to create an infinite money machine, it didn't work. They aren't innocent victims here

janmo 4y ago

Well it has been 4 hours now, and the media has been reporting it for an hour, everyone on Twitter and Reddit is talking about it. Yet, no communication from FTX or SBF.

kobalsky 4y ago
> Yet, no communication from FTX or SBF. this is the biggest issue. if they are having any kind of technical issues they should be on top of it. even if everything is fine by tomorrow and withdrawals are working again, this radio silence is unprofessional and at this point it feels like they are trying to avoid saying anything that will be held up in court against them.
- toomuchtodo 4y ago
  Even strong denial can cause a run. See Credit Suisse as the most recent example. https://www.google.com/search?q=credit+suisse+insolvent https://www.google.com/search?q=credit+suisse+insolvent
- amluto 4y ago
  If indeed the issue is that the hot wallet is empty and funds need to be transferred from the cold wallet, they could say so.

somuchfordonor 4y ago

> Even if FTX has stopped withdrawals, it does not necessarily mean they are insolvent. Listen to yourself.

Scoundreller 4y ago
I’m still trying to decide if stopping withdrawals is smoke, or is the fire.
- joyfylbanana 4y ago
  It is fairly common for exchanges to have (short) pauses in withdrawals. The majority of funds are in a cold storage, and for security reasons it usually takes some time to get the funds out from there "live". If lot of people are withdrawing at once, it would cause minor inconvenience to any exchange. They have to transfer funds from cold storage, and that takes time. It is almost impossible to determine if an exchange is solvent or not until you know their cold storage addresses.
  - Scoundreller 4y ago
    Stopping withdrawals is definitely a fire if cold storage addresses are a mystery.
- asdajksah2123 4y ago
  The cryptocons will assure us that it's actually unicorn farts.
- somuchfordonor 4y ago
  Well it turned out to be fire.
323 4y ago
If the ATM Cash Machine stops withdrawals because it's out of money it doesn't mean that the bank which owns it is insolvent. Even if you go to a bank branch, large withdrawals ($100k+) need to be announced days in advance, they will not give you the money on the spot.

pgwhalen 4y ago

> Even if FTX has stopped withdrawals, it does not necessarily mean they are insolvent. Update, FTX is insolvent: https://twitter.com/cz_binance/status/1590013613586411520 https://twitter.com/cz_binance/status/1590013613586411520

snapcaster 4y ago

>Generally, if Binance would not have been hostile, they could have dumped their FTT tokens with less effect on the markets. They chose not to do so and telegraphed their dump very openly. This does not reflect well on the crypto industry as general. We will find out very soon. I think this is a good thing. Companies overleveraging themselves like this _should_ be punished or at least have the risk of this happening hanging over them. FTX tried to create an infinite money machine, it didn't work. They aren't innocent victims here