Alameda Research's balance history on FTX confirms death blow happened during LUNA collapse, expert says

• Will Clemente has concluded that Alameda Research's ultimate collapse may have trickled down from Terra saga in May 2022.
• His assumption comes after observing the hedge fund's balance history on FTX, going back to early 2022.
• The expert attributes the fall to long leverages heading into the event or an ill-advised move to absorb toxic flow for FTX.

Alameda Research's balance history on its sister firm and cryptocurrency exchange, FTX, confirms that the hedge fund's death blow goes back to May 2022, when the Terra Luna ecosystem imploded. This is the opinion of Twitter user Will Clemente, a renowned crypto analyst and the founder of digital asset investigator Reflexivity Research.

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Death blow to Alameda was LUNA (aka LUNC)

Clemente’s comments came ahead of the Omnibus Hearing, set for September 13, with the researcher going through the Government exhibit showing Alameda's balance history on FTX. Recording up to $12 billion within a span of less than two months to May, the analyst says, "Death blow to Alameda was LUNA."

When the Terra ecosystem imploded, Bitcoin (BTC) price and the rest of the altcoin community, starting with Ethereum (ETH), bled, kickstarting the bear market that investors continue to maneuver from today following the depegging of the Terra stablecoin and its support coin LUNA. Needless to say, the LUNA and FTX crises were among the toughest the crypto industry has had to endure. Citing a user on X:

Luna and FTX incidents were the toughest for this industry, What a year this was in Crypto.

In a recent report, blockchain analytics company Nansen argued that the untimely collapse of the FTX exchange and its sister firm Alameda Research were associated with the Terra/LUNA stablecoin collapse. According to the report, FTX's insolvency may have been "inevitable" right from when the "two-token stablecoin ecosystem's arbitrage-based dollar peg failed." Noteworthy, the collapse saw up to $48 billion in value go down the drain, sending multiple firms to their bankruptcies as they cried "over-leveraged positions."

While reports indicated that FTX and its subsidiary Alameda imploded because of bad bets, the Nansen report contradicted this, attributing the collapse to "malfeasance" as opposed to poor management.

FTX Alameda implosion, how the trickle effect played out

Following revelations that assets reached up to $5 billion in FTT, making the bulk of Alameda's balance sheet illiquid, token holders engaged in a selling spree. FTX exchange recorded massive exchange outflows at the time. The situation worsened when Binance CEO Changpeng Zhao (CZ) hinted at the largest exchange by trading volume disposing of its $584 million FTT holdings, triggering a run.  

Cognizant that FTT tokens had a very low circulating supply, even small sales could sway the price hugely. Part of the deceit that made the situation worse is that FTX effectively controlled 80% of the FTT supply instead of the standard of less than 50%.

With Alameda and FTX holding most of FTT supply, a sell-off from one of the entities could affect the other's balance sheet.

Following the Terra/LUNA crash, FTX secretly loaned billions of dollars of customer funds to Alameda in what has been described as commingling. The Nansen report, therefore, adds credence to Clemente’s  assumption of mounted losses, making the Terra crisis "a plausible case," considering FTT was the only collateral, but then it turned illiquid, causing the exchange to pause withdrawals.