When FTX collapsed last November, the crypto exchange’s native token, FTT, was thrust into the spotlight.
The coin’s public-facing use was to give customers discounts and perks. But in the trial of former FTX CEO Sam Bankman-Fried, prosecutors made it clear that the token was also instrumental in manipulating the balance sheets of both the crypto exchange and its sister trading firm, Alameda Research.
Nearly a year after FTX’s collapse, and following the damaging revelations from SBF’s trial, the coin as of Thursday evening was still worth about $1.26, according to CoinGecko.
As FTX and Alameda go through the bankruptcy process, there is little to give investors hope that the token has any sort of underlying value, analysts tell Fortune, and yet, people keep buying it. Since mid-October, FTT’s market cap has jumped about 27%, to more than $417 million as of Thursday. (That’s still way down from its September 2021 peak of $9.6 billion.)
One reason for this renewed optimism could be that speculators are hopeful the coin could be used in some new version of the exchange. Because FTX filed for Chapter 11 bankruptcy, the company’s caretaker CEO, John J. Ray III, could choose to relaunch the exchange. This “FTX 2.0” could find a way to incorporate FTT, further boosting the token’s price.
Even in traditional markets, speculators often gamble on bankrupt stocks hoping to make a tidy profit, Mark Connors, head of research at 3iQ, told Fortune. Yet, while some could argue that FTT served as a de facto investment vehicle tied to FTX, it lacks the same protections afforded to regular shares of public companies.
Investors who hold shares of a bankrupt company, like Bed Bath & Beyond, which filed for Chapter 11 earlier this year, will get at least some, if only a tiny piece, of value from any relaunched enterprise that results from bankruptcy proceedings, Connors explained. Because FTT isn’t exactly an equity stake, it’s unclear what FTT holders would receive if FTX reboots.
Existing bankruptcy law isn’t straightforward when it comes to how crypto-custodial assets are treated, and even less so when it comes to a company’s native token, Connors said. And all of this assumes FTX gets relaunched in the first place.
“I don’t see any value in the FTT token, aside from speculative purposes by traders,” Connors said.
One hope for speculators buying the dip on FTT was likely the verdict in Bankman-Fried’s trial, said Terrence Yang, the managing director at Swan Bitcoin. If jurors had reached a not-guilty verdict on several or all counts against SBF, it could have pushed FTT prices up in the short term, netting a few professional traders a nice reward on their risk. Instead, on Thursday a jury found SBF guilty on all seven charges against him.
FTT’s price barely moved.
But bad actors also could still manipulate the token’s value through wash trading or by pushing false narratives on social media or in other crypto communities, Yang warned. “Can you make money off of it as a retail trader? No. Unless you’re lucky—very lucky.”
