Let’s get ready to rumble. The war between two of the biggest bosses in crypto space, Binance CEO Changpeng Zhao and FTX CEO Sam Bankman-Fried (SBF) seems to be just picking up steam and is currently the most heated issue for the market.

The drama began early Sunday morning when FTX’s FTT token took a sudden drop as rumors surfaced that a giant whale with 23 million FTT, probably Binance, might be dumping its tokens. Shortly after, the price of FTT started to drop by 10%.

Fears spread like wildfire on Twitter that the downturn could trigger liquidations for FTX, leading to a Terra Luna-style “death spiral.” Some users accused SBF of running a fraud scheme with the FTT token.

For those confused about #FTX & #FTT, here’s the TLDR:

1⃣ FTX prints FTT out of thin air2⃣ FTX lends FTT to Alameda Research3⃣ Alameda Research borrows USD stables against FTT4⃣ Alameda Research sends USD stables to FTX5⃣ Repeat = infinite money

No need to sell FTT! pic.twitter.com/RJiEpbcgrf

— Duo Nine | discord.gg/ycc (@DU09BTC) November 6, 2022

Binance Vs. FTX: War Time

The sudden price slump was preceded by a report on Dec. 2 that revealed internal financial documents of FTX and showed overlaps between Bankman-Fried’s crypto exchange FTX and his hedge fund Alameda Research.

According to the report, Alameda’s balance sheet is supported in large part by the FTT token, and thus on shaky ground. The $5.82 billion in FTT recorded on Alameda’s balance sheet as of June 30 compared to a total value of just $3.32 billion for the entire FTT offering that day.

While Caroline Ellison, the CEO of Alameda, denied the allegations and pointed to incomplete data, uncertainty remained in the market.

CZ, for his part, subsequently stroke a blow yesterday (Sunday), The Binance CEO made his decision public to liquidate all remaining FTT on its books as a result of these recent revelations that have come to light.

According to estimates by CryptoQuant CEO Ki Young Ju, Binance owns at least 24 million FTT, worth $547 million – an amount that can be crucial for the market.

CZ stressed that its action was not “directed at a competitor.”

We will try to do so in a way that minimizes market impact. Due to market conditions and limited liquidity, we expect this will take a few months to complete.

Caroline Ellison, the CEO of Alameda, responded to this a little later by saying that her company would be happy to buy the token for $22, stopping FTT’s freefall for the time being.

@cz_binance if you’re looking to minimize the market impact on your FTT sales, Alameda will happily buy it all from you today at $22!

— Caroline (@carolinecapital) November 6, 2022

Even though CZ emphasized that the decision to sell all FTT is not targeted against its ore competitor SBF, the action reflects something else. Thus, it seems very strange to announce a sale in significant amount before the actual sale. By doing this, all other market participants will sell ahead of you. Therefore, the question arises, what is CZ’s purpose? Certainly not the minimum possible profit.

In addition, CZ followed up late last night with a tweet reinforcing the community’s rumors and fears that FTX is a Terra Luna-like ponzi scheme. The Binance CEO wrote:

Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won’t pretend to make love after divorce. We are not against anyone. But we won’t support people who lobby against other industry players behind their backs. Onwards.

Analyst Dylan LeClair warned that “large speculative attacks are carried out” and “this excessive leverage can also be used for short selling.” As he noted, “open interest in FTT has increased 2.5 times in the last 24 hours, about $100 million for a small spot market, illiquid free float, and more spot sales coming soon (CZ)”.

And CZ has not been long in coming and has already started the first liquidations. The Binance confirmed that a transaction from an unknown wallet to Binance for 30 million FTT tokens worth about $584.8 million is “part” of Binance’s liquidation of FTT tokens

Yes, this is part of it. https://t.co/TnMSqRTutr

— CZ Binance (@cz_binance) November 6, 2022

Several On-chain data providers are showing that FTX appears to be deploying funds urgently in response to Binance’s liquidation of FTT.

According to CryptoQuant CEO Ki Young Ju the pressure is mounting for SBF and the FTT Token. FTX’s stablecoin reserve just reached a year-low. They account for “only $51M as of now, -93% over the last two weeks”.

Furthermore, FTX hourly withdrawals for ETH just hit an all-time high, as well as FTT token reserve across all exchanges. 60% of the circulating supply is in exchanges at the moment, signaling a mounting selling pressure for FTT.

Meanwhile, FTX CEO Bankman-Fried tried to calm down the market and tweeted:

We’ve already processed billions of dollars of deposits/withdrawals today; we’ll keep going. (Taking up anti-spam checks to process more–sorry if you got those. We’re hitting node rate capacity, will keep going.) Also tons of USD <> stablecoin conversions going on.

And in the end you should do what you want, and trade where you want. We’re grateful to those who stay; and when this blows over we’ll welcome everyone else back.

The FTT price briefly dropped below $22 in the past few hours, but recovered slightly at the time of writing.