Crypto Trading Firm FalconX Dismisses Liquidity Crunch Speculations over Funds Trapped in FTX
US-based specialist for institutional crypto trading dismissed speculations alleging it was confronting a liquidity crunch. FalconX clarified that though 18% of its overall unencumbered cash equivalents were trapped in the defunct FTX exchange, it has adequate operating capital.
FalconX Disputes Claims of Liquidity Crisis
FalconX chief executive Raghu Yarlagadda indicated that previously it had accumulated sufficient capital during its decades of runaway performance to shield its operations in the worst scenario of losing the funds. Yarlagadda’s surprising revelation comes after FalconX’s reluctance to admit direct exposure through assets locked on the bankrupt FTX exchange.
Yarlagadda’s remarks echo the December 8 announcement conveyed via the FalconX blog post, acknowledging the high uncertainty periods witnessed in the crypto industry. The announcement expressed awareness of the extreme challenges of locking partner businesses, clients, and the crypto industry.
FalconX Financial Health Demonstrated
FalconX dismissed claims of encountering a liquidity crunch by reaffirming its strong position amidst FTX bankruptcy. The Friday statement, also released via its Twitter account, lamented the adverse impact the FTX’s fallout caused on the crypto industry. It assured its clients and partners that FalconX has retained the trust of its institutional investors to realize 80% month–over–month growth in its trading volumes. The statement reiterated its proven record of facilitating daily trade volumes running into billions of dollars.
FalconX downplayed the speculations over its liquidity by citing its strong financial health. In particular, the statement indicated the balances trapped in the FTX are within its counterparty risk tolerance limits. Yarlagadda ranked FalconX among the best-capitalized and liquid crypto firms carrying a 4% debt-to-equity ratio. Besides, it disclosed that 80% of FalconX balance sheets were held in regulated US banks.
Validating Real-Time Risk Assessment
The statement ruled out having direct exposures to the beleaguered Alameda Research, BlockFi, and Genesis. While FalconX’s update on December 8 was optimistic about the crypto industry recovery, it backed Yarlagadda’s observation that FTX’s restructuring will involve a complex and lengthy process.
FalconX restated that its small exposure to FTX relative to its balance sheet validated its risk management approach. Yarlagadda added that it uses real-time risk scrutiny and offers credit overcollateralized on its platform.
FalconX promised to lead the crypto industry’s maturation by actively working with partners oriented to creating trusted institutional infrastructure.
Editorial credit: T. Schneider / Shutterstock.com
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