Well, mark this down as something I certainly didn’t expect to see happening any time soon - if ever. While some ponzis are pretty obvious if you know what you’re looking for, others catch everyone completely off-guard.
As everyone is by now aware, FTX, Alameda, etc., all went under this past week. It all started with a Coindesk article that started drawing a little closer scrutiny to Alameda Research’s balance sheet. Why did that matter?
A few days later, CZ posted this tweet signaling Binance’s intent to sell their FTT position.
At this point, the CEO of Alameda Research, Caroline, tweeted this out, which of course in the world of crypto painted a huge target on their back. It reminds me of the time someone had a huge on-chain short on YFI and all of Crypto Twitter banded together to blow them out.
BTW, this tweet from Caroline was paying homage to a once famous, now infamous tweet from SBF where he and Coinmamba got into it over the value of SOL a couple years ago. Coinmamba was the butt of jokes for a while as SOL ran from 2 dollars to over 200 after that tweet.
Coinmamba ultimately got his revenge in the end, however - sometimes patience is a virtue.
Shortly thereafter, the price of FTT fell below 22, and the whole ponzi began to unravel. But why did that number even matter to begin with?
Withdrawals started to slow and pause on FTX.
Panic and rumors began to spread. Sam tried again to stop the fear.
From here, Sam put out a since-deleted tweet:
"A competitor is trying to go after us with false rumors," Bankman-Fried tweeted. "FTX is fine. Assets are fine. FTX has enough to cover all client holdings. We don't invest client assets (even in treasuries). We have been processing all withdrawals, and will continue to be."
But it couldn’t stop the damage already being done as people flooded towards the exit, eventually resulting in all withdrawals being paused.
Eventually, everyone was aware of what was going on, and it was apparent that FTX/Alameda were going under. Sam came out and said that they had come to an agreement to be acquired by Binance, and by this point everyone was aware things were pretty dire, but there was a sliver of hope. CZ’s tweet, however, mentioned that the deal was contingent upon the whole thing passing due diligence - and the markets reflected all of these sentiments by first rallying and then dropping again significantly.
One day later, the deal was announced as off, and by that point, everything had imploded on SBF’s end.
A day after that, and once one of crypto’s most shining stars and companies were snuffed out as SBF declared bankruptcy.
Everyone thought that was pretty much that - the damage was done, there would be contagion and other companies shuttering, but FTX and Alameda were gone, and eventually this stuff would work its way through the legal system. Friday night PST, however, things started to heat up again.
There was even an update pushed out to the FTX app that appeared malicious that happened at the same time.
I obviously don’t know what is going to happen from this point, and it will be quite a while before the ripple effect from these events fully dissipate. What I do know, however, is that this isn’t the first time something like this has happened before in our ecosystem, and it won’t be the last. Obviously the magnitude of what FTX/Alameda has done is enormous, but it comes at a time when crypto is much more mature than it was when, say, Mt. Gox got robbed of 850,000 bitcoins and people thought crypto might be dead forever. We’re far beyond that point now, which is why I don’t remain too concerned about where we go from here price wise in the short term as there is no doubt in my mind that Ethereum and crypto are here to stay.
In fact, I’ve turned up my own personal DCA and feel pretty bullish of late on crypto as a whole, even though that may sound ridiculous - and maybe it is. But I invest with a long-term time horizon, and the bottom line is that the best trades I’ve ever made in crypto are contrarian ones, so I guess I don’t have a choice.
The FTX situation is going to continue to evolve, so I’ll see you next week with another update! That’s it for today - have a great week!