Monday November 14, 2022
The ‘headline news’ coverage of crypto’s Enron moment continues this morning.
Here are my top thoughts going into the week:
New investments into crypto markets will be limited until US lawmakers issue formal regulations;
I do not see an immediate driver for crypto pricing to recover to pre-Luna levels without these regulation;
I am concerned that sovereigns – most specifically the US and China – have amassed large crypto holdings -- through seizures – that could lead to further downward pressures on crypto pricing;
I think the most overlooked group in this sector are crypto miners who were already struggling with liquidity and will face increased pressures with current pricing levels;
All crypto and related start-ups will finally see the light and consider new lower valuations – I have been surprised how some companies felt they could still hold 2021 – early 2022 valuations without having supporting revenue and cash flows; and
Development among crypto and blockchain technologies will shake out faster than I had expected with proven use-cases obtaining greater financial support
◾ FTX commence voluntary bankruptcy proceedings in the US under Chapter 11 and Sam Bankman-Fried resigned as CEO. (Twitter)
◾ The Wall Street Journal reports that select executive from Alameda and FTX knew that FTX was using customer funds. (WSJ)
◾ The Bahamas’ Financial Crimes Investigation Branch has begun an investigation into FTC “to determine whether any criminal misconduct has occurred.” (Twitter)
◾ Approximately $475 million was hacked from FTX this weekend. (Elliptic)
◾ Although reports had Sam Bankman-Fried fleeing to Argentina, he claims to still be in the Bahamas. (CNBC)
◾ Representative Brad Sherman (D-CA) called for an investigation into the failure at FTX, and is asking the SEC to “take decisive action to put an end to the regulatory gray area in which the crypto industry has operated.” (House.gov)
◾ Hedge Fund Galois Capital has “roughly half of [its] capital stuck on FTX”. (FT)
◾ FTX represented less than 10% of all customer deposits at Silvergate Bank (SI). (Silvergate)
◾ The Ontario Teachers’ Pension Plan invested $95 million (0.05% of total net assets) into FTX and does not expect to have significant impact from FTX’s failure. (OTPP)
◾ Sports and fan engagement token Chillz will allocate up to $10,000 in CHZ tokens to FTX account holders that had CHZ locked on the platform. (Twitter)
◾ Anthony Scaramucci’s Skybridge Capital is seeking to buy back the 30% equity it sold to FTX in September. (Bloomberg)
◾ Miami-Dade County and the NBA’s Miami HEAT announced te termination of the business relationship with FTX and have begun removing FTX’s signage from the arena. (NBA)
◾ GameStop (GME) announced its intention to wind down its relationship and gift card marketing partnership with FTX. (Twitter)
◾ Payments platform Plaid has suspended FTX’s access to its products. (Twitter)
Government & NGO Actions
◾ Hong Kong’s Financial Secretary reiterated the city’s commitment to becoming a virtual asset hub, saying industry regulation is even more attractive to investors in the wake of FTX’s collapse. (SCMP)
◾ Ukraine’s cyber-police have shut down a high yield crypto scheme accused of stealing over $200 million. (News.bitcoin)
◾ Manhattan’s District Attorney has “frozen more than $1.3 million in cryptocurrency during fraud investigations conducted over the past ten months.” (News.bitcoin)
◾ Hong Kong is planning to issue the world’s first tokenized Green Bond by the end of the year. (Beincrypto)
◾ Russian state-owned bank VTB is adding the digital ruble to its mobile banking platform. (News.bitcoin)
Public Company Releases
◾ Canaan (CAN) reported revenues of $137 million in the third quarter driven by sales of crypto mining rigs with adjusted net income of $23 million. (Canaan)
Restructuring, Losses and Legal News
◾ Voyager Digital said it was evaluating strategic options as a result of the Chapter 11 filing by FTX and reopening the bidding process. (Cision)
◾ Crypto exchange AAX is using the FTX situation to halt withdrawals for 7 – 10 days to implement a new service update. (AAX)
Protocols, Applications & Business News
◾ Binance is forming an industry recovery fund “to help projects who are otherwise strong, but in a liquidity crisis.” (Twitter)
Market Data
◾ The discount to NAV on the Grayscale Bitcoin Trust (GBTC) dropped to a new high of $46.4% to close Friday. (Grayscale)