The Domino Effect Involves USDT, CPI is Temporarily Favorable, and Panic is Still Spreading

2022-11-11, 09:51

TL;DR

- FTX started processing withdrawals from Bahamian users.

- SBF has refused to file for bankruptcy and is still seeking up to $9.4 billion in rescue financing.

- The domino effect of the FTX event caused the temporary depegging of USDT, perhaps USDC and BUSD becoming winners.

- Presently, FTX's stablecoin holdings are less than $100 million.

- US Consumer prices cooled by more than expected in October at 7.7% a month ago, indicating that the market inflation has eased.

FTX Event Updates

It has been nearly a week since the FTX storm started. It is reported that FTX has started to handle withdrawals from customers in the Bahamas, and the amount of withdrawals only accounts for a small part of FTX's assets. It is worth noting that according to insiders, FTX did not give priority to processing withdrawals from users in Taiwan with a higher proportion of business volume, or it was unable to complete cashing in time due to the large amount involved.

According to Reuters, citing sources familiar with the matter, SBF has refused to apply for bankruptcy and appoint restructuring advisers, and is still seeking up to $9.4 billion in rescue financing. However, there is a sad atmosphere inside FTX. An internal employee released the article "We have lost our life savings". The employee stated that the relevant screenshot has begun to spread in the community, and the media confirmed most of its authenticity.

Currently, according to the tweet of Crypto KOL FXHedge, the Bloomberg Billionaire Index shows that SBF's net assets have decreased from $16 billion to $1.

Story review:
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Domino Effect Appears, USDT was Suspected of Depegging

The FTX crash posed a series of domino effects, and USDT began to show some abnormalities.

As it is predicted that USDT may be depegged due to the withdrawal challenge caused by FTX, Avraham Eisenberg, a hacker who revealed his identity after hacking Mango last month, began to short USDT. In 24 hours, his short position has tripled to $173 million, and meanwhile, he posted a screenshot of the trading on Twitter as proof.

On Coingecko, the USDT price was slightly depegged on the 9th, which was later clarified by Paolo Ardoino, CTO of Tether, because of data problems in the API connection between CoinGecko and a few exchanges, resulting in a 3% price difference in USDT.

On the other hand, according to Dune data, Alameda is shorting USDT by borrowing on Aave (so USDT's APY is higher), and selling USDT on Curve in exchange for USDC. In the past 24 hours, Tether has handled USDT redemptions of approximately $700 million of USDs, while TRON DAO Reserve claims that in order to protect the entire blockchain industry and the crypto market, it will purchase $1 billion of USDs total, and all reserves will be stored in CEX.

Subsequently, Tether froze $46 million of USDs on the Tron blockchain. It is reported that the frozen address is owned by FTX Exchange.

Since its launch in 2014, Tether disclosed its Proof of Reserve for the first time in May 2021. The reserves held by Tether include nearly 76% of cash and equivalents as well as other short-term deposits and commercial paper. The rest are secured loans, bonds, and other investments, including BTC and other digital currencies (only BTC). Precisely, commercial paper constitutes the majority of its cash and cash equivalents, accounting for 65%. Trust deposits account for 24%, reverse repurchase bills account for 3.60%, treasury bills account for approximately 3%, and actual cash accounts for only 3.87%. Although it was previously claimed that Tether was 100% cash-backed, the company's reserve details at that time showed that less than 3% of Tether's reserves were actually held in cash.

The Widespread Stablecoin is Affected, and FTX's Stablecoin Holdings is Less than $100 Million

Last night, in addition to USDT being affected by the domino effect of the FTX event, USDD, FRAX, and other stablecoins were also impacted, and USDD hit $0.95 for a short time; FRAX hit as low as $0.96. The stablecoin EUROC (pegged with euros) issued by Circle was also involved. It fell to $0.982 for a short time, but it rose to $1.02 in less than half an hour, up 1.3% in 24 hours.

Source: coingecko

In the list of widely frustrated stablecoins, as Alameda sold USDT to exchange for USDC, and a large number of users were eager to sell USDT and exchange it into compliant stablecoins, USDC and BUSD suffered a setback slightly, but they recovered quickly in a short time, and both rose to a maximum of $1.02.

Gate.io supports the compliance stablecoin market, including USDC, BUSD, and other compliance stablecoin transactions, and always provides users with better token selection and asset protection.
As of 12:00 on November 11, the top ten stablecoins, except USDC, BUSD, DAI, GUSD, and LUSD, were all below $1.

Source: coingecko

As a note, according to Nansen data, affected by recent events, FTX has exported nearly $200 million of stablecoins in the past seven days, and the current balance of stablecoins is approximately $95 million. In the past seven days, OKX and Huobi also saw an outflow of nearly $500 million and more than $150 million of stablecoins respectively.

Source: Nansen

The Negative Sentiment Caused by the FTX Event Continued, and CPI Temporarily Boosted the Market

Yesterday evening, the US announced that the quarterly adjusted CPI data for the end of October rose to 7.7% year on year, lower than the market expectation, indicating that the market inflation has eased. After the data was released, the dollar index dived and the NASDAQ futures index rose by more than 3%, the largest increase in two and a half years. The crypto market was also inspired by the news. BTC rebounded from approximately $16,300, rising to a peak of $18,106 within 10 hours, up nearly 11%; The ETH rose as high as $1,342.

Source: coingecko

According to Coinmarketcap data, affected by CPI data, the crypto market generally rose yesterday evening. XRP, DOGE, ADA, MATIC, and other mainstream tokens all rose significantly, of which MATIC rose 27%, and FTT rose to $4.2 at the highest.

Although the overall market has recovered, most institutions and analysts are still holding a wait-and-see attitude - the annual inflation rate of the Federal Reserve has dropped to 7.7%, which is the low level before the conflict between Russia and Ukraine, but the current inflation is still overheated for the Federal Reserve. The interest rate increase in December, the interest rate level next year and the economic growth of the United States are the uncertainties that the current market is more concerned about. After the impact of the tightening policy on the market gradually disappears, the "recession expectation" may replace the "tightening expectation" as the main melody of the market.

Author: Gate.io Researcher Jill Ma & Byron B. Translator: Joy Z.
This article represents only the researcher's views and does not constitute any investment advice.
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