Investors withdrew ~$20B in crypto from centralized exchanges (CEXs) over the last two weeks in response to the collapse of FTX and Alameda. According to an analyst at JPMorgan, the largest net outflows were at Gemini, Crypto.com, and OKX, a Seychelles-based CEX founded in China.
Just two weeks ago, the bank run on FTX began following a tweet by Binance's Changpeng Zhao, known online as “CZ.” In that run, it's estimated that $6B was withdrawn from FTX over three days. FTX was a trusted CEX with celebrity endorsements from Steph Curry, Tom Brady, and Larry David and stadium naming rights in Miami. FTX's founder, Sam Bankman-Fried (SBF) is an MIT graduate with Stanford professor parents. It just didn't seem like FTX was insolvent.
Today, crypto is dealing with major trust issues. Basically any CEX that issued its own token–similar to FTX's self-minted FTT token–took a beating in the wake of FTX’s collapse. Crypto.com's CRO token, and Huobi’s HT token both fell more than 50%. Just as these exchanges lost their money printers, their customers also wanted their real crypto back.
Over $12.9B worth of Bitcoin left CEXs since November 8, according to data from Messari. The rush of outflows is truly staggering, only slowing over the last couple days:
As the FTX contagion spread, Gemini took an early hit. Gemini’s yield farming program, Gemini Earn, halted withdrawals last week. The Gemini Earn program was powered by Genesis, which appears to be insolvent now. According to data from Nansen, on that day, Gemini's net outflow was about $500M in non-BTC crypto.
Traditionally, crypto leaving exchanges is viewed as a positive for the crypto markets. It’s generally accepted that investors move crypto to exchanges to sell it and remove crypto from exchanges to hold it. But this time feels different, doesn’t it?