Nov 2022, Sabrina
Data Source: Footprint Analytics Dashboards
On November 2nd, Coindesk released Alameda's private financial documents, which caused the largest cryptocurrency crash in history. Alameda is a venture capital and trading company owned by FTX founder Sam Bankman-Fried and closely related to the exchange.
In the following week, 140 million FTT tokens flowed into Binance, causing the token to drop from $26 to below $2. This led to a run on FTX, with so-called "hackers" taking $473 million from reserves, and the world's second-largest trading platform declaring bankruptcy.
Key Events Recap:
November 2nd: Coindesk released Alameda's private financial documents.
November 6th: Binance founder CZ announced that Binance would sell all its FTT holdings in the coming months. Alameda CEO Caroline Ellison offered to buy all of Binance's FTT holdings for $22 each.
November 6th: FTT experienced its first significant drop (10%) but returned to $24 after Caroline Ellison's offer.
November 8th: FTX International suspended withdrawals.
November 8th: FTT plummeted to $5.
November 8th: Binance announced its interest in acquiring FTX.
November 11th: Acquisition terminated.
November 11th: FTX filed for bankruptcy, and user funds were stolen.
Impact of FTX Crash on the Cryptocurrency Market:
FTX's crash plunged the market into extreme fear, with BTC dropping to its lowest level of $16,000 this year.
Role of On-Chain Data in this Event:
Before the FTX crash, there were severe warning signals on-chain.
On November 5th, 75 million FTT tokens were transferred out of FTX, indicating a sell-off after the event. We also witnessed two major sell-offs of FTT on November 8th and November 13th, with approximately 110 million and 210 million FTT tokens being transferred out, respectively.
From November 2nd to November 8th, over 140 million FTT tokens were transferred to Binance. The surge in trading volume occurred on the 5th and 6th, with approximately 45 million and 42 million tokens being transferred, respectively.
Over $1.4 billion has flowed out of FTX's Ethereum balance.
FTX's major token balances also experienced significant declines.
By monitoring on-chain data, we can detect early warning signals and identify potential risks in account funds held in CEX or DEX. In the case of FTX, several key indicators indicate a loss of confidence in the platform, with people rushing to withdraw their funds.
According to 0xScope's data, most of the funds flowing into FTX come from withdrawals from other exchanges (Binance, Kucoin, Kraken, Huobi, etc.) and direct inputs from related parties such as Alameda and Jump. However, no significant inputs from cold wallets were found, leading us to suspect that FTX has depleted its own reserves and may have misappropriated user funds to support Alameda.
Monitoring Token Metrics:
Monitoring key metrics of tokens includes market capitalization, price, daily trading volume, transaction amounts, token holders, and distribution.
Monitoring CEX Wallet Addresses:
In a tweet on November 9th, CZ mentioned that all cryptocurrency exchanges should do Merkle Tree reserve proof. Binance will soon start doing reserve proof, fully transparent. Since then, some exchanges have disclosed the addresses of their reserve wallets.
Footprint has created dashboards based on the wallet addresses disclosed by FTX and Binance. Users can also monitor changes in wallets by entering selected addresses.
Monitoring Entity Clusters:
0xScope's Watcher tracks transactions related to the same entity. It connects addresses from several entities, including KuCoin, Binance, Gate, OKex, MEXC, Kraken, Huobi, Circle & FTX, Alameda, to show how funds flow through different stakeholders. Users can customize dashboards to monitor and analyze market anomalies and set alerts.
Using On-Chain Data for Enhanced Asset Security:
According to data statistics, FTX has made 187 investments in 57 projects. Specific project details can be viewed through the provided dashboard.
Monitoring token metrics, CEX wallet addresses, and using on-chain data can help identify risks and enhance asset security.
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