Deleveraging Update, Bitcoin On-Chain, Derivatives, Price, & Macro Chart Pack
A systemwide deleveraging of FTX's aftertaste is underway, and bitcoin is one of the foremost the assets being liquidated.
Dear readers,
The fallout of the FTX deleveraging is upon us, and until it has fully run its course, bitcoin’s price future remains in question. Industry players become forced sellers, and the selling is cascading throughout connected counterparties—bitcoin is unfortunately caught in the balance sheet crossfire until the bad leverage is purged from the system. As the global growth slowdown is met with easing talk by Fed speakers, the FTX/Alameda contagion is sweeping through the ecosystem and snatching heads. This post gets into the nitty gritty of the bitcoin market’s inner workings. Let’s dive in!
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Today’s Topics
Where are the other bodies after FTX’s collapse (read: fraud)?
With hashrate still increasing and price in the toilet, some miners won’t make it.
Bitcoin is leaving exchanges in droves as investors pull coins to their own wallets. Not your keys, not your coins.
Short sellers got greedy last week, a sign of a potential cycle bottom.
Global economic data is getting worse, as the Fed doves become louder.
FTX Counterparty Deleveraging Update
While FTX only held 1.11 bitcoin on its balance sheet against $1.4 billion customer claims on bitcoin—as in, barely more than a single coin (sigh)—the counterparties impacted by the fallout of FTX’s insolvency definitely hold REAL bitcoin. Such BTC will be among the assets sold to cover FTX losses and withdrawal requests (by limited partners in hedge funds, for example) as bad leverage is expelled from industry holders. Here are the direct creditors to FTX, and other cross-balance sheet impacted counterparties:
BlockFi - “significant exposure” in the form of obligations owed to BlockFi by Alameda, assets on the FTX platform, and a revolving credit line of $400 million provided by FTX, though it’s unclear how much was drawn by BlockFi, or how dependent normal business operations at the embattled business had become on this credit line which is now inaccessible. We were able to confirm that several of our readers did receive their bitcoin balances to their own wallets over the past 48 hours, although many still have “pending” withdrawals on BlockFi’s platform.
Genesis Trading - $175 million locked in FTX, “it will not impact our market-making abilities,” per an announcement. Received a $140 million equity infusion from its parent company.
AAX - Suspending withdrawals for 7-10 days, “not related to the FTX contagion” per a release.
Ikigai Asset Management - one of many crypto hedge funds that kept their treasuries on FTX, “a large majority of the fund’s total assets” locked in FTX. Without picking on Ikigai in particular, keeping a “large” majority of fund assets on an exchange like FTX reeks of terrible risk management.
Solana Labs - $33.7 million (FTT Token and STM Token), a “negligible” loss that won’t impact operations, per the CEO.
Coinbase - ~$15 million, as reported by the Crypto.com CEO during an AMA.
Crypto.com - $10 million, able to recover $990 million prior to the collapse, per the CEO.
There’s more to the story with Crypto.com however, and many are piecing strange behavior together and concluding that they may be the next victim of this liquidity crisis. It was revealed that it sent 320,000 ETH to an exchange called Gate.io and only received 285,000 back—losing ~$40 million of client funds in the process. Many are pointing to this as potential proof of reserves fraud, whereby exchanges swap reserves between one another in order to pass audits that customer funds are backed 1:1, while others say it’s an innocuous mishap. Either way, this is questionable behavior exhibited by one of the world’s largest exchanges during a liquidity crisis, so people are going to jump on it as indicative of deeper issues. The CEO says that it was a “mistake,” a truly fishy response.