The FTX curse: Tokens trend to zero after listing
FTX is the third largest crypto exchange by spot trading volume (behind Binance and Coinbase). All Star Charts highlighted something interesting about FTX: They’ve got impeccably (bad) timing at launching new cryptos or assets on their platform.
Many trend toward zero after launching. Let’s take a look at some examples that All Star Charts highlighted:
1/ Gala ($GALA) — a crypto and NFT gaming project is down over 94% after an initial pump from its listing.
2/ Media Network ($MEDIA) — which offers “decentralized peer-to-peer media streaming,” has fallen over 95% since its listing.
Those are just a few examples. They’ve also recently expanded into stock and other assets.
- Remember when lumber prices went crazy two years ago? FTX launched lumber futures at the very peak.
- Last week, they launched the US Dollar Index perpetual futures. Is this a sign of a peak for the US dollar?
We’ve mentioned several times that investing in IPOs has poor performance historically — but investing in a token debut on FTX may be even worse.
Why list tokens? FTX doesn’t care which direction it’s going as long as people buy or sell. There’s another theory: exit liquidity.
- FTX has special relationships with Alameda, which invests in early crypto projects (potential conflict of interest).
- In “theory,” Alameda and other early investors can dump their tokens on investors after the token is listed on exchanges — a.k.a. exit liquidity.
Sounds like the stock market? It’s even worse in crypto, where regulations are lacking.
The Average Joe: “Note to self, don’t be exit liquidity.”