Cryptonite October 2022

They laissez-faired. Now they are finding out.

Shyam Sunder

Nov 09, 2022

It’s time for Cryptonite - our monthly roundup of all things crypto - with Tejaswi Nadahalli.

You can follow Tejaswi on twitter @nadahalli and he blogs at tejaswin.com

1×

0:00

-36:24

While we were recording this episode, Changpeng Zhao, the founder of Binance (the world’s largest crypto exchange), was trying to trigger a run on FTX, the world’s third largest crypto exchange.

It looks like he succeeded.

Timeline

The first salvo from CZ:

CZ 🔶 Binance @cz_binance

As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4

The denial.

Lines begin to form.

web3 is going just great @web3isgreat

Speculation emerges around Alameda Research and FTX solvency; Binance liquidates holdings November 7, 2022 web3isgoinggreat.com/?id=speculatio…

Speculation emerges around Alameda Research and FTX solvency; Binance liquidates holdings On November 2, CoinDesk published a leaked balance sheet from Alameda Research (a trading firm also owned by FTX founder and CEO Sam Bankman-Fried). The sheet suggested that Alameda held substantial amounts of FTX's $FTT token. "While there is nothing per se untoward or wrong about that, it shows Bankman-Fried's trading giant Alameda rests on a foundation largely made up of a coin that a sister company invented, not an independent asset like a fiat currency or another crypto," CoinDesk wrote. Following the report, Binance CEO Changpeng "CZ" Zhao announced they would be liquidating their FTT holdings. CZ also took a shot at SBF's recent controversial policy recommendations, writing, "Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won't pretend to make love after divorce. We are not against anyone. But we won't support people who lobby agai

SBF first appeared conciliatory towards Binance, writing "I respect the hell out of what y'all have done to build the industry as we see it today, whether or not they reciprocate, and whether or not we use the same methods. Including CZ. Anyway -- as always -- it's time to build. Make love (and blockchain), not war." However, he later wrote that "A competitor is trying to go after us with false rumors" and urged that "FTX is fine. Assets are fine."

Liquidity dries up and withdrawals are frozen.

The Block @TheBlock__

BREAKING: FTX appears to have stopped processing withdrawals, on-chain data show theblock.co/post/184176/ft…

A shotgun marriage is proposed by the raider himself.

SBF @SBF_FTX

1) Hey all: I have a few announcements to make. Things have come full circle, and FTX.com’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for FTX.com (pending DD etc.).

FTX equity is a donut.

Misha @tastybits

This @SBF_FTX letter informing shareholders their $1.8B in equity invested is likely gone is really quite stunning. It’s both casual, and effortlessly free of any substance.

Some large profile investors take a bath.

Eric Newcomer @EricNewcomer

Sequoia invested in a $420m round in FTX at a $25B valuation in October 2021 and a consortium with Paradigm invested $400M at $32B in January 2022. And now it's selling in a fire sale? This is a truly crazy event in startup world. Dot-com bust level event

Chris Bakke @ChrisJBakke

The SoftBank Vision fund is undefeated in being the last check into any company before it blow up.

Special Situations 🌐 Research Newsletter (Jay) @SpecialSitsNews

RIP @TomBrady

Maybe, it’s the future of finance after all.

PiΞrce👾ᵍᵐ @crosbyventures

Wait... FTX and Binance merge to become... *Finance* 🤯

So how did Binance end up with FTX equity?

Hide Not Slide @HideNotSlide

You can't make this stuff up. FTX helped Binance get into the crypto futures market back in 2019, which led to the very equity & FTT investment that would spell its demise.

How did FTX get here? Probably because it tried to bailout Alameda (Thread)

Are we now then looking at a potential Alameda insolvency scenario (Thread)? In which case a massive liquidation event is likely (Thread).

What’s the next domino to fall?

Stacey @iamstacetheace

Tether’s biggest market maker is FTX….is Tether the next domino to fall? protos.com/tether-papers-…

Links

If pre-mines are equities, then most of DeFi is hosed.

Bryan Jacoutot @BryanJacoutot

BREAKING: Federal district court rules LBRY's pre-mine and ICO was an unregistered securities offering. Notably, the court rejected LBRY's "utility token" argument and its "lack of fair notice" arguments. Case has big implications for Ripple, Eth, and others Thread below 🧵👇🏻

LBRY 🚀 @LBRYcom

We lost. Sorry everyone.

Tejaswi pointed out that there’s actually a Bitcoin Miners ETF (ticker: WGMI, because, why not?) Launched in February this year. They should’ve launched an inverse of it simultaneously, NGMI.

Because a lot of miners are not making it.

Core Scientific may consider bankruptcy following uncertain financial condition (cointelegraph)

web3 is going just great @web3isgreat

Iris Energy Bitcoin mining firm close to defaulting on loans of $103 million November 2, 2022 web3isgoinggreat.com/?id=iris-energ…

Iris Energy Bitcoin mining firm close to defaulting on loans of $103 million "Iris" in navy blue and "Energy" in green(attribution) Iris Energy, an Australian "sustainable Bitcoin mining company", has announced that they are close to defaulting on loans used to purchase $103 million of Bitcoin mining rigs. These machines depreciate in value quickly, and are currently estimated by the company to be worth $65–$70 million. At the moment, they produce $2 million in gross profit from mining Bitcoin, which is not sufficient for the company to meet the $7 million of loan payments each month.

Bitcoin mining is a highly lucrative business as long as the price of bitcoin keeps going up — and as long as investors believe it will keep going up.
When the price crashes — and the price of bitcoin has halved since the start of the year — crypto miners face margin calls, they have to dump their bitcoins, and reality comes knocking.
amycastor.com

But somehow, bitcoin’s hashrate keeps growing and growing. (bitcoinist)

Shoot your shot, they did.

drnick (anti-crypto arc) 🗳️² @DrNickA

According to this research 97.7% of tokens launched on @Uniswap were rugs. arxiv.org/pdf/2201.07220…

If the scams don’t get you, the hacks will.

A hacker who stole $117 million in digital assets from decentralized finance exchange Mango Markets now says they'll return the funds, but only if token holders let them keep $70 million without the possibility of criminal prosecution. (bankinfosecurity)

RBI’s CBDC (pdf) enters the beta-testing phase. (economictimes)

Offline UPI: aka UPI Lite (outlookindia, economictimes)

StockViz

Discussion about this post