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 troublesome 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 a giant cryptocurrency alternate on the point of collapse amid liquidity considerations and allegations of misused funds. Bankman-Fried instructed traders 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 property, that means it lent out greater than half of its property.
Headlines blare comparisons with all the large previous blowups, so I began by whole quantities concerned. I used to be stunned to be taught that Madoff was greater than Lehman. The massive distinction is that Lehman was a systemic threat, that means all counterparties had been in danger.
In all instances, the reputational loss is huge. Individuals like Sam Bankman-Fried fooled supposedly sensible traders 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 just isn’t large in comparison with different large previous blowups, however that is plenty of folks dropping their life financial savings – ugh. However Wait and See, some cash was recovered from Madoff and Mt. Gox.
Altcoin Traders. Even crypto blue chips like Bitcoin/BTC and Etherum/ETH took successful however some crypto have been hammered and should not get better.
Subsequent Cui Bono (who wins):
Legacy Finance. An quaint financial institution or regulated alternate appears to be like good in comparison with FTX. Oh and Legacy Finance property could also be transferring from bear to bull market.
Coinbase. A completely regulated cryptocurrency alternate appears to be like good in comparison with FTX.
Non custodial wallets, the place an alternate can not take your property, appears to be like like the fitting know-how for those who assume the long run can 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?
