Exchange Outflows, BlockFi Bankruptcy Analysis, & Miner Capitulation
Bitcoin analysis to kick off the week. Hope you had a great Thanksgiving weekend!
As the world reels from the collapse of FTX, individuals are learning the important lesson of self-custody, while exposed counterparties such as BlockFi are learning the importance of hiring a good corporate liquidator.
Well, at least we can be thankful that Bitcoin’s hash rate continues its relentless rise! Wait a minute, that’s falling too?
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Record-high exchange outflows as people pull their bitcoin from counterparty risk.
BlockFi has officially filed for Chapter 11 bankruptcy, will begin formal liquidation.
Under-profitable miner capitulation is underway as price falls and difficulty rises.
The 30-day change of supply held in exchange wallets dropped by a net 170,000 bitcoin. These are the highest-ever outflows from exchanges in bitcoin’s history:
Following the FTX explosion and several subsequent unwinds of “trusted” custodians in the wider crypto ecosystem, people are finally grasping the bitcoin ethos of distrusting institutions—removing their bitcoin from exchanges to a self-custody solution and protecting themselves from custodial and counterparty risk.
Implications for bitcoin price
Fewer coins readily in circulation mean fewer units for buyers to bid for. When a sustained bid emerges as the macro environment shifts into a supportive risk environment, this should act like a springboard for positive price action—not because coins can’t easily go back on exchanges for sale, but because owners won’t immediately sell them. Moving bitcoin offline is a statement by the owner that he or she intends to hold it as a savings vehicle rather than a tradeable asset, less likely to sell at the first sign of positive price action.
BlockFi Bankruptcy Analysis
BlockFi filing for bankruptcy is no surprise.
In the aftermath of FTX’s insolvency, it was revealed that BlockFi was one of its largest creditors and debtors. BlockFi participated in an FTX fundraising round to the tune of $250 million, and much later FTX US would extend BlockFi a $400 million revolving credit facility, of which BlockFi would use $275 million. Days after the unwind BlockFi paused withdrawals, citing “significant exposure” to FTX, presumably at least 9 figures, according to FTX’s redacted creditor list published by the liquidators. Since then, any assets lent to BlockFi or left on the platform have generally been considered unrecoverable and worthless.
Now that BlockFi has officially filed for Chapter 11 bankruptcy protection, we have an official list of the 50 largest creditors, including $30,000,000 owed to the SEC:
Apart from the three named creditors listed above, the identity of every other unsecured claim has been redacted. Since these creditors used the BlockFi platform as clients, their information will rightfully remain private information to the liquidators—though, as the bankruptcy proceeds, more claim filings will be published and the identities of creditors will continue to be unveiled. Speaking of which, a new claim filing for FTX’s ensuing bankruptcy revealed Margaritaville as a creditor, likely an unpaid bar tab by Sam and friends. You can’t make this stuff up, folks:
There has been a prevailing assumption that BlockFi’s unsecured creditors were never going to see their assets again—but it’s now formalized via the Chapter 11 filing.