After Hacktober, which saw countless DeFi projects being exploited for hundreds of millions of dollars in total, November was expected to be a calmer month for crypto. However, that was not the case as the industry saw one of the fastest, loudest, and most shocking deterioration of a giant – FTX.

An analysis by the risk-modeling firm Gauntlet outlined a tweet from Alameda’s CEO that changed the whole situation for the worse.

This Tweet Is to Blame?

Let’s rewind the clocks by two weeks when Binance’s CEO took it to Twitter to inform that the exchange plans to sell its entire stash of FTX tokens (FTT) due to some “recent revelations.” These came out of leaked documents showing that Alameda Research – the trading company founded by FTX’s CEO SBF – used mostly FTT for collateral and was overexposed to the asset.

According to some estimations, Binance held more than 23 million tokens, valued at over $500 million back then. This was approximately 10% of FTT’s market cap at the time. Alameda’s CEO, Caroline Elison, quickly responded to CZ, offering to purchase all FTT coins at $22 per one. The problem stemmed from the fact that this offer was below the market’s price.

Zhao refuted the proposition, saying Binance will “stay in the free market.” But there might be bigger ramifications from Elison’s tweet than just trying to buy tokens below their market price.

Sell Orders Skyrocketed

Cited by Bloomberg, Gauntlet asserted that the number of sell orders shot up minutes after this tweet. The risk-modeling company observed sell and buy orders for the largest FTT pairs on big exchanges, such as FTX, Bitstamp, and Bitfinex, and concluded that the buy/sell ratio dropped to below negative 200%. Essentially, this meant that for every buy order, there were four sell ones.

The report reads that when the exchanges’ orders books are balanced between sell and buy orders, this ratio stands at zero. Going down to negative 200% “shows that the sell pressure for FTT skyrocketed and it kept for more than seven hours.”

“Market conditions across a variety of centralized exchanges that traded FTT against USD or USDC materially degraded against FTT soon after Ellison’s tweets. And this led to the sharp decline in FTT that likely led to a cascade of margin calls and or liquidations for Alameda based on their balance sheet.” – commented Tarun Chitra, founder and CEO of Gauntlet.