Warren Buffet, who has a approach with phrases, stated solely when the tide goes out are you able to see who has been swimming bare. Throughout 2022 the tide has been out in a tricky bear market and FTX has been swimming bare. So I made a decision to dig in and attempt to get some perspective amid all of the clickbait noise.
First, in case you want a information 101, Bankman-Fried’s FTX is an enormous cryptocurrency trade getting ready to collapse amid liquidity considerations and allegations of misused funds. Bankman-Fried advised buyers that Alameda owes FTX about $10 billion, which FTX loaned to Alameda utilizing buyer deposits. Earlier than making the mortgage, FTX had simply $16 billion in belongings, that means it lent out greater than half of its belongings.
Headlines blare comparisons with all the massive previous blowups, so I began by whole quantities concerned. I used to be stunned to be taught that Madoff was larger than Lehman. The large distinction is that Lehman was a systemic threat, that means all counterparties have been in danger.
In all instances, the reputational loss is huge. Individuals like Sam Bankman-Fried fooled supposedly sensible buyers similar to Sequoia Capital. And market costs fall, in some instances near zero such because the FTT token (which is akin to fairness in FTX).
Re the skullduggery between Binance and FTX, this can be a story of two sharks and one wins. I used to be going to place Binance within the Cui Bono (who wins) class however selected a brand new class which is Wait and See.
First Cui Amisit (who loses):
- FTX shareholders similar to Sam Bankman-Fried and Sequoia Capital
- FTX Depositors aka merchants who held crypto at FTX. $10 billion will not be huge in comparison with different huge previous blowups, however that is a lot of folks dropping their life financial savings – ugh. However Wait and See, some cash was recovered from Madoff and Mt. Gox.
- Altcoin Buyers. Even crypto blue chips like Bitcoin/BTC and Etherum/ETH took successful however some crypto have been hammered and should not get well.
Subsequent Cui Bono (who wins):
- Legacy Finance. An quaint financial institution or regulated trade seems to be good in comparison with FTX. Oh and Legacy Finance belongings could also be transferring from bear to bull market.
- Coinbase. A completely regulated cryptocurrency trade seems to be good in comparison with FTX.
- Non custodial wallets, the place an trade can not take your belongings, seems to be like the precise know-how in case you suppose the long run might be self regulated
Within the Wait and See class:
- Binance. Will they win as final man standing? Or will merchants shun their threat as being an excessive amount of like FTX?
- Crypto blue chips like Bitcoin/BTC and Etherum/ETH Bitcoin. Is that this finish of bear market capitulation or signal of a bubble popping?
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