FTX’s $5.5 Billion in Alleged ‘Liquid Assets’ Put to Question
If someone asked you to name the silliest thing you’ve heard someone say, you would be hard-pressed to beat FTX’s inferred statement about their assets. According to the company’s FAQ page, their assets amount to a whopping $5.5 billion in alleged ‘liquid assets’, but don’t let the fancy name fool you; we’re here to find out if it’s really all it’s cracked up to be!
The ‘Liquid Assets’
Venture over to FTX’s FAQ page and behold the intimidating terminology of their claimed ‘liquid assets’. Check it out:
- Locked SOL cache
- Illiquid FTT Holdings
- Custodial holdings of ETH & BTC
- Tether USD, USDT, and other stablecoins
Some of these terms make perfect sense to you, but others may give you pause. Unfortunate though that may be, it’s time to break them down and investigate whether FTX’s assets are as ‘liquid’ as they claim.
First of all, let’s start off with the ‘locked SOL cache’. Basically, this means that the company holds a large amount of the cryptocurrency Solana that is ‘locked’ and cannot be cashed out right away. So right away, this reduces FTX’s liquid assets by however much Solana they own.
Now, let’s move on to the illiquid FTT Holdings. These are essentially holdings of tokens from the FTX exchange itself and not other assets. This means that, even if the token price were to go up, the amount of liquid assets available would not because the assets are not liquid and can’t be converted into cash.
As for the custodial holdings of ETH & BTC, this is a bit more straightforward; essentially, FTX is holding ETH and BTC on their own platform and so the funds are potentially available for withdrawal. However, the amount of liquid assets available is still going to be determined by the price of BTC and ETH.
Finally, there’s the Tether USD, USDT, and other stablecoins. These are essentially just other cryptocurrencies that have been pegged to a certain currency, such as the US dollar. These funds are generally more liquid than the other alternatives, but it still depends on the current exchange rate.
So what is the verdict? Well, FTX certainly seems to have a lot of so-called ‘liquid assets’, but the reality is that much of it is not easily convertible into cash. The company’s holdings of Solana, FTX tokens, and various stablecoins are not ideal for quick liquidity and so the amount of liquid assets is actually quite a bit lower than the $5.5 billion they claim.
At the end of the day, it’s important to remember that anyone can make claims about their assets and it’s up to you to investigate them further. When it comes to FTX, you should definitely not be taken in by their claims without doing a bit of digging into the real liquidity of their alleged ‘liquid assets’.
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