The FTX curse: Tokens trend to zero after listing - The Average Joe

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    The FTX curse: Tokens trend to zero after listing

    victorlei

    October 10, 2022

    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.”

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