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"...We have decided that we will not pursue the potential acquisition of FTX" - Binance
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In this edition:
Unraveling...
FTX, the third largest crypto exchange, is amid insolvency and acquisition by a major competitor, Binance. In the last 3 days, it began to unravel that FTX and sister company Alameda is in big trouble.
Trouble
The trouble started with the reveal of Alameda’s balance sheet. Alameda's assets ($5.8 billion of the $14.6 billion reported) were in FTX's exchange token, $FTT. A large majority of the rest were in Solana ecosystem tokens. There was a mechanism between Alameda and FTX that inflates the value of $FTT.
Here's how it works:
When CZ of Binance announced he would sell all of Binance's $FTT holdings, worth $500+ million, 3 days ago, it sparked panic in the markets, causing pressure on FTT. As FTT took an enormous hit, FTX had to pause withdrawals because it could not cover users’ demands for their assets.
To solve these, SBF returned to CZ for help by reaching an agreement for a potential sale. After a bit more than 24 hrs of due diligence conducted, Binance opted out of the purchase. This move leaves a negative sentiment surrounding the crypto markets.
Lessons From The Insolvency
Don't trust, verify
The deception, greed, and fraud in this space are far more than most would have imagined. Always verify!
When there is smoke, there is fire
People tend towards inaction, which is dangerous in a fast-moving crypto market. When there are rumors of mismanagement, it's better to play it safe by withdrawing assets ASAP. Pullout!
Losers
SBF and FTX
SBF ran one of the most exciting crypto exchanges valued at billions of dollars with an 8 figure daily revenue. SBF went from controlling a sustainable crypto business to losing it all. Trust and goodwill are all gone!
Crypto Adoption
Faith in crypto will be shaken for some time. Many people had FTX as their sole entry into the space. Despite the positives of crypto, this incident joins the list of bad actors that derail the space's growth.
Solana
SBF and FTX were crucial to getting solana its early validation and early traction. The question now is whether solana can survive and thrive on its own. Validators are currently unstaking their assets, which might lower the value of SOL when it hits the market.
Winners
CZ, Binance, and other exchanges
Binance and other exchanges are set to gain from FTX's loss of customers. In numerous tweets, CZ has leveraged this incident to drive comments on Binance being the superior exchange.
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This week's trending coins
Cryptocurrency lender, Nexo, has boasted of its $0 net exposure to the ongoing FTX crisis. The company announced this in a tweet.
As a conservative institution that prioritizes risk controls, Nexo has been able to protect all funds by withdrawing its whole balances from FTX over the last few days. The CEO of Nansen, Alex Svanevik, made this evident in the on-chain data he provided. He stated,
“New dashboard in beta: Exchange Flows. Wondering who's been withdrawing from FTX? Congrats, @Nexo, as #1 (or one of their customers).”
Recommended by LinkedIn
Nexo also stated that its small loan to Alameda (<0.5% of the company’s assets) was fully collateralized by digital assets and sold fully by the team a few days ago. So, this means 100% principal recovery and $0 losses for the company.
To further blow its trumpet, the lending firm reminded everyone that it is the only firm that has never restricted withdrawals or asked for financial help. Nexo stated that even in the past, it had $0 exposure to some insolvent crypto firms like Luna, Three Arrows Capital, Celsius, Babel, and Hodlnaut.
Nexo stated that its partnership with Armanino LLP offers a real-time audit of the company’s custodial assets. The audit showed that Nexo’s asset, which includes <10% of NEXO tokens, exceeded customer liabilities.
Finally, the lending company reminded everyone that Nexo is the right place to buy and sell crypto, borrow, earn peacefully and spend with the efficiency of its partnership with Mastercard.
The Teaser section
Question:
FTX CEO Sam Bankman-Fried's net worth was $14.6 billion, how much is he worth now?
Potential Answers:
BC's Musts
YouTube: Does Bitcoin Fix the Energy Crisis?
Book: The Crypto Story
Latest on Circle...
Jeremy Allaire, the Co-Founder and CEO of Circle, reassured the crypto community that his firm does not have any exposure to FTX or Alameda Research.
According to his latest set of tweets, Allaire claimed that Circle has neither traded FTX Tokens (FTT) nor made any loans via Alameda Research or FTX. He also clarified that besides FTX, Circle is also a “tiny equity holder” for other crypto exchanges, including Coinbase and Kraken.
Referring to the crypto market’s bearish turn after Binance agreed to purchase FTX, Allaire compared the situation with the Lehman Brothers crisis, adding,
“Finally, as someone who's been involved in this industry for 10 years, it is disappointing that a technology that was spawned in reaction to the Lehman Bros. moment of 2008 has given rise to its own version of the same.”
Latest on BlockFi in the US...
Remember earlier this year when the SEC accused BlockFi of providing unregistered securities in the form of its interest accounts? BlockFi had to pay $50M to the SEC and another $50M to regulators from 32 states as a settlement. They also suspended Interest Accounts (BIA) in the US and began pursuing registration with the SEC for a new lending product.
That has changed. BlockFi has announced its plans to provide interest-bearing crypto accounts for US-based accredited investors. BlockFi will begin rolling out the beta version of this product for select US clients by the end of 2022. Moreover, it will be made available to all verified users residing in the US starting in early 2023.
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