Is FTX and Alameda Research on the brink of collapse? Concerns are mounting as reports suggest Sam Bankman-Fried’s trading firm appears to have most of its assets in illiquid altcoins, a situation that experts are calling unsustainable. The core issue? Liquidity. When assets are difficult to quickly convert into cash without significant loss of value, a company's ability to meet its obligations comes into question.

This problem is further exacerbated by the concentration of assets in a single, potentially vulnerable token. Worse even is that the lion’s share of its assets is in FTT, the token created by FTX. This creates a dangerous interdependence: FTX's value heavily relies on the perception of FTT, and Alameda Research's financial health is tied to both.

According to available data, Alameda Research held a diverse crypto portfolio valued at over $276.16M, including BTC, ETH, STG, USDT and other digital assets. The firm used BTC and ETH for trading and presumably hedging. However, the critical question is the allocation percentage. If a substantial portion of the portfolio consists of less liquid altcoins, even a relatively small market downturn could trigger a cascading effect, making it difficult to sell those assets at reasonable prices to cover liabilities.

The illiquidity of these altcoins raises serious questions about Alameda's ability to navigate market volatility and meet redemption requests. The interconnectedness between FTX and Alameda Research adds another layer of complexity and risk to the situation. This situation highlights the inherent risks associated with investing in cryptocurrencies, particularly the dangers of holding a large portion of assets in illiquid and internally-created tokens.

Stay updated on the latest developments surrounding FTX and Alameda Research as the crypto world watches to see how this situation unfolds. Understanding the importance of liquidity and diversification is paramount for anyone involved in the digital asset space.