Why would a market maker hold so much of an asset.

Market makers do not typically hold $B of anything.

Alameda does not need to borrow so much FTT to make markets.

In conventional markets, market makers need the ability to sell that which they make a market in. This can be done by actually owning the asset, by having a credit relationship enabling sales without owning the asset, by naked shorting, etc.

If you can’t naked short, and if sales settle effectively immediately (cryptocurrency confirmation may well be slow, but you can’t usefully sell something and buy it back using the sale proceeds without confirming or at least generating and signing the transactions), then you need access to the actual token so you can sell it.

In contrast, one can make a market in EUR/USD without actually sitting on a big pile of EUR and USD. In fact, market makers are likely to target an average position of zero in every currency except their home currency unless they are also trying to make some sort of long term bet. Similarly, I doubt you’ll find that most market makers in, say, grain futures have warehouses full of grain. (Grain wants to be eaten, not hoarded for the life of a business. Also, making commodity markets is an entirely different business than growing, storing, transporting, and using commodities.)

(This is not trading or market advice, obviously.)

I graduated with a degree in finance from Wharton, worked as a quant at Citadel Securities, and have been a high-frequency trader for more than a decade. But I'm more than sure that your credentials at finance or trading are more qualified. :)

You should ask the money back from Wharton. One of the respondents below explains what insolvency means (correction: pretty much all of the comments below).

Lmao. So did all the guys at Lehman, Bear Stearns and LTCM.

Ouch. Care to comment now?

So...