What is the FTX Token (FTT)? History of Exchange Utility Token

For many crypto investors and market observers, the mention of FTX or its native token, FTT, conjures images of one of the most spectacular collapses in financial history. Yet, despite the catastrophic downfall of the FTX exchange in November 2022, the FTX FTT token continues to trade on various platforms. 

If you’re a crypto investor, market observer, or a former FTX user grappling with bankruptcy claims, you’re likely wondering: what was FTT, how did it lead to such a disaster, and why is this “zombie token” still moving today?

The Current State of FTT: Is It Still Alive?

The FTX Token (FTT) is, in a technical sense, still “alive” as it continues to be traded on various cryptocurrency exchanges. However, its existence is largely as a speculative asset, devoid of its original utility and overshadowed by the bankruptcy of its issuing entity. Once a cornerstone of the FTX ecosystem, FTT now represents a cautionary tale in the volatile world of digital assets.

Current Price Action & Market Cap (Brief summary of ~$0.60-$0.70 range)

From its all-time high of approximately $85 in September 2021, the FTT token experienced a precipitous decline to well under $1 during the FTX collapse in November 2022. Today, FTT typically trades in a narrow range, often hovering between $0.60 and $0.70. Its market capitalization, once in the tens of billions, is now a fraction of that, reflecting the severe loss of confidence and utility. The trading volume, while present, is significantly reduced from its peak, often driven by speculative impulses rather than fundamental value.

Why is FTT Still Trading?

The continued trading of FTT can be attributed to several factors, primarily speculation rather than any inherent utility. Its original function within the FTX ecosystem has ceased to exist, as the exchange is defunct. The main reasons for its continued existence on various platforms include:

• Speculative Trading: Some traders engage in highly speculative activity, hoping for short-term price fluctuations or betting on potential future developments, such as an FTX 2.0 reboot.
• Liquidation by Holders: Original holders who still have FTT might be attempting to liquidate their assets, even at significantly reduced prices.
• Bankruptcy Proceedings: The existence of FTT is linked to the ongoing Chapter 11 bankruptcy process. While the estate has indicated FTT holders are unlikely to recover much, any news or rumors surrounding the bankruptcy can trigger trading activity.
• “Zombie Coin” Phenomenon: FTT has become a “zombie coin”—a cryptocurrency associated with a failed project but still lingering in the market. These tokens often trade based on retail investor sentiment, news headlines, or sheer momentum rather than any real-world application.

What Was FTT Used For?

The FTX Token (FTT) was designed as a utility token, initially launched as an ERC-20 token on the Ethereum blockchain layers, with a version also existing as an SPL token on Solana. Its primary purpose was to power the FTX cryptocurrency exchange, offering a range of benefits to users and aiming to create a robust internal economy. At its core, FTT was intended to incentivize platform usage and provide competitive advantages, much like other exchange tokens such as Binance Coin (BNB) or those found on the Kraken exchange.

Trading Fee Discounts & Burning Mechanism

One of the main draws of holding FTT was the promise of reduced trading fees on the FTX exchange. The more FTT a user held, the greater the discount they would receive on spot and futures trading fees, making it an attractive proposition for active traders. 

Beyond discounts, FTX implemented a “buy and burn” mechanism, similar to stock buybacks. A portion of the fees generated on the FTX exchange—typically 33% of all net fees—was used to buy FTT tokens directly from the open market and permanently remove them from circulation. 

This deflationary mechanism was designed to reduce the total supply of FTT over time, theoretically increasing its scarcity and value, thereby benefiting holders.

Collateral on FTX Futures

Another significant utility for FTT was its use as collateral on the FTX futures market. Traders could use their FTT holdings as collateral for futures positions, allowing them to leverage their token holdings to increase their trading capital. 

This feature was particularly appealing to users seeking to maximize their trading power. However, this functionality proved to be a double-edged sword, as it allowed Alameda Research, FTX’s sister hedge fund, to heavily leverage FTT, ultimately contributing to the exchange’s downfall. 

This circular relationship, where FTX printed FTT, Alameda bought it, its price rose, and Alameda then borrowed against it, created a dangerous “flywheel” scheme that masked significant insolvency.

The Collapse: How FTT Triggered the FTX Crash

The spectacular implosion of FTX in November 2022 was not just a failure of an exchange; it was a crisis deeply intertwined with the FTX FTT token. The token, intended to be a utility asset, became the linchpin in a house of cards constructed by FTX and its sister trading firm, Alameda Research.

The Alameda Research Connection (The Balance Sheet Leak)

The story of the collapse truly begins with Alameda Research, the quantitative trading firm founded by Sam Bankman-Fried, the CEO of FTX. Alameda and FTX, while supposedly separate entities, had deeply intertwined finances. 

A critical moment arrived in early November 2022 when a leaked balance sheet from Alameda Research, published by CoinDesk, revealed a startling truth: a significant portion of Alameda’s assets—billions of dollars—was held not in independent, liquid assets, but in FTT tokens. 

This meant that Alameda’s financial health was heavily reliant on the value of a token issued by its sister company, creating a massive conflict of interest and an illusion of liquidity. Alameda was using FTT as collateral to borrow customer funds from FTX, a practice that proved devastating.

The “Bank Run” and Liquidity Crisis (Nov 2022)

The leaked balance sheet instantly raised red flags across the crypto industry. Concerns mounted that if the price of FTT were to drop, it would cripple Alameda, which in turn would expose FTX to massive losses, as customer funds were effectively lent to Alameda. This fear quickly materialized into a full-blown “bank run” on FTX.

Timeline of the Collapse (November 2022):

• November 2: CoinDesk publishes Alameda Research’s leaked balance sheet, highlighting its large FTT holdings.
• November 6: Binance CEO Changpeng “CZ” Zhao announces that Binance will liquidate all of its remaining FTT holdings, citing “recent revelations.” This public declaration triggered widespread panic.
• November 7-8: FTT’s price begins to plummet. FTX faces a massive liquidity crisis as withdrawal requests surge, exceeding the exchange’s ability to process them.
• November 9: Binance briefly considers acquiring FTX to bail it out but quickly backs out after reviewing FTX’s financial records, calling them “beyond our ability to help.”
• November 10: Regulators in the Bahamas freeze FTX assets.
• November 11: FTX, Alameda Research, and dozens of affiliated companies file for Chapter 11 bankruptcy in the U.S. Sam Bankman-Fried resigns as CEO. The FTT token’s price, which had been around $22 just days before, crashed below $1.

Binance’s Role in the Sell-Off

Binance, the world’s largest cryptocurrency exchange and an early investor in FTX, played a pivotal role in accelerating the collapse. In 2021, FTX had bought out Binance’s equity stake, paying Binance in FTT tokens. After the Alameda balance sheet leak, Binance CEO Changpeng “CZ” Zhao announced on November 6th that his exchange would sell off its entire FTT holdings, amounting to hundreds of millions of dollars. This announcement, effectively a public vote of no confidence from a major industry player, exacerbated market fears and triggered a massive sell-off of FTT, pushing its price down rapidly and igniting the “bank run” on FTX.

FTT in Chapter 11 Bankruptcy Proceedings

Following the catastrophic collapse, FTX, Alameda Research, and their numerous affiliates filed for Chapter 11 bankruptcy protection in the United States. This initiated a complex legal process to determine the future of the companies and the repayment of creditors, including former customers and, controversially, FTT token holders.

Will FTT Holders Be Repaid? (The “Subordinated Claim” issue)

The question of whether FTT holders will receive any repayment through the bankruptcy proceedings is one of the most pressing concerns for those who still hold the token. Unfortunately, the outlook is bleak. The FTX bankruptcy estate, under the leadership of new CEO John Ray III, has consistently indicated that FTT tokens likely have zero value in the context of the recovery plan.

FTT claims are typically classified as “subordinated claims.” This means that customer deposits, traditional creditors, and other secured claims take priority in the repayment hierarchy. 

Any value remaining after these higher-priority claims are satisfied would then theoretically be available for FTT holders, but given the scale of the customer losses (estimated to be billions of dollars), it is highly improbable that any funds will remain for FTT holders. 

Court filings and statements from the bankruptcy estate have reinforced this position, advising FTT holders not to expect recovery.

Rumors of an FTX 2.0 Reboot

Despite the dire situation, rumors of an “FTX 2.0” reboot have periodically surfaced, fueled by discussions within the bankruptcy proceedings about potentially relaunching the exchange. 

These discussions, aimed at maximizing creditor recovery, have sometimes involved proposals for a new exchange that might integrate FTT in some form, or issue new tokens to existing FTT holders.

Such rumors have occasionally led to speculative pumps in FTT’s price. However, it’s critical to note that these are merely proposals and speculation. There is no guarantee that an FTX 2.0 would ever materialize, nor is there any certainty that it would utilize FTT, or provide any value to current FTT holders. 

Any decision regarding an FTX 2.0 would require court approval and would likely involve a complex negotiation with potential bidders and creditors. These rumors largely contribute to the “zombie token” narrative, where price action is driven by hope rather than concrete developments.

Is FTT a Good Investment Now? (Risks)

Given the history and current status of the FTT token, the question of whether it represents a viable investment is critical. The short answer is: FTT is an extremely high-risk, highly speculative asset with virtually no fundamental value. Investors should approach it with extreme caution.

The Volatility of Meme/Zombie Coins

FTT now largely operates as a “meme coin” or “zombie coin.” These are tokens that have lost their original utility, are associated with failed projects, or derive their value primarily from social media hype, speculative trading, and retail investor sentiment rather than underlying technology or actual use cases. Such assets are characterized by:

• Extreme Volatility: Prices can swing wildly on minor news, rumors, or even social media trends, leading to rapid gains or devastating losses.
• Lack of Fundamental Value: Without a functioning platform or ecosystem, the token has no intrinsic utility to drive demand.
• Manipulation Risk: Low liquidity and high speculation make these tokens susceptible to market manipulation, including “pump-and-dump” schemes.
• Near-Zero Recovery Prospect: As established by the bankruptcy estate, the chances of FTT holders recovering value through legal channels are negligible.

For those looking to diversify their portfolio into altcoins, there are many other projects with active development, clear roadmaps, and genuine utility that present a more transparent risk profile than FTT. To protect yourself from exchange risks, many users now prefer self-custody wallets rather than keeping funds on exchanges.

Regulatory Risks (SEC classification as security)

Beyond the operational and financial risks, FTT also faces significant regulatory hurdles. The U.S. Securities and Exchange Commission (SEC) has explicitly labeled FTT as an unregistered security in its complaints against former FTX and Alameda executives, including Caroline Ellison and Gary Wang.

If FTT is formally classified as a security, it would be subject to stringent regulations typically applied to stocks and other investment contracts. This classification has several implications:

• Limited Exchange Listings: It could severely restrict FTT’s ability to be listed or traded on regulated U.S. crypto exchanges in the future.
• Legal Scrutiny: Holders and traders could face heightened scrutiny or be subject to different tax treatments.
• Ongoing Legal Battles: The SEC’s stance adds another layer of legal complexity and uncertainty to the token’s future, making it even less attractive for legitimate investment.

Bottom Line

The FTT token reflects the rise and collapse of FTX. The token shifted from being a core asset of a major crypto exchange to a clear warning about opaque financial practices, concentrated control, and extreme leverage inside centralized platforms. It now trades in limbo with no purpose and stands as a reminder of the large-scale wealth destruction tied to FTX.

FTT still appears on select exchanges, but the token holds no real utility. Its future depends only on unlikely legal outcomes in the FTX bankruptcy that could restore value, a scenario experts and administrators consider extremely remote.

For investors, FTT serves as a warning to perform due diligence, understand tokenomics, and recognize the risks embedded even in leading crypto projects.

Frequently Asked Questions (FAQs)