I can’t believe this needs to be said, but the FTX Token (FTT 12.58%) should be avoided at all costs. The token that was born out of the now-bankrupt crypto exchange FTX, which was run by convicted fraudster Sam Bankman-Fried. It has more than tripled in a little more than a week in the hope that the FTX exchange itself would make a return. But even the return of FTX as a business doesn’t mean the token has any value.
This is a speculative token, at best, and currently has no real utility. Yet, that doesn’t seem to matter to the crypto market, which is bidding up the most volatile, speculative assets it can find.
FTX’s rise and fall
The FTX Token was originally a token created by FTX to give traders discounts on trading fees. For active traders, the savings could offset the cost of buying the token itself.
In reality, we now know that Bankman-Fried was using the FTX Tokens he controlled as collateral for loans he took out. Once the value of the FTX Token fell, it exposed the losses in his positions and ultimately led to the collapse of FTX itself.
Even the trading of FTX Token was manipulated to keep the value high and keep Bankman-Fried’s margin positions afloat.
FTX’s bankruptcy and Bankman-Fried’s trial should have brought some clarity to what the value of the FTX Token was, but that seemed to end this week.
Is FTX coming back to life?
There’s speculation in the market that FTX will somehow be brought back to life as an exchange. That’s certainly in the realm of possibilities; the company has a lot of name recognition and a lot of old customers it can recruit. But there’s no requirement that the exchange will need to put any value on the FTX token or give it any use.
That hasn’t seemed to deter traders who are buying FTX Tokens in the slim expectation that it will be of value someday. There’s even been up to $1 billion in volume for the token, so this isn’t all about a low-liquidity token that’s been moving wildly for a few days.
I want to reiterate that any pop in the FTX Token is pure speculation right now and nothing more.
Cryptocurrencies need fundamental value
If we’ve learned one thing in the past three years, it’s that speculation on tokens that have no utility or use is a great way to lose money. And betting on a bankrupt exchange takes that risk to another level.
The fundamental need for tokens is either running a blockchain or providing a medium of exchange for a product or service on the blockchain. The FTX Token does neither and may never do so in the future.
Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
