Coin circle, Lehman moment is coming

One day in the crypto currency world, one year on earth

In the field of crypto currency, a big event happened in the past two days.

In the early morning of November 9, Sam Bank man Fried (“SBF”), president of FTX, the world’s second largest crypto currency exchange, tweeted that FTX had reached an agreement with Finance, the world’s number one crypto currency exchange, on a strategic investment. FTX will accept a wholly-owned acquisition by Finance and the team is processing the backlog of withdrawal requests as-is, which will eliminate the exchange’s liquidity crunch, but it will take time……

Champing Zhao, President of Coonan Exchange, later also tweeted.

“This afternoon, FTX came to us for help. There is a severe liquidity crunch at FTX. To protect our users, we signed a non-binding letter of intent to fully acquire FTX and help remedy the liquidity crisis. We will be conducting full due diligence in the coming days.”

The two men’s Twitter postings triggered an overall super volatility in crypto currency prices on Nov. 9.

First, the slowly falling FTT and other crypto currency tokens, even bit coin and ethereal, began to stop falling, with Coonan’s token BNB skyrocketing to nearly $400 and the FTT token rebounding from around $15 to over $21.

What no one expected was that half an hour later, the crypto currency plate suddenly began to turn sharply, the general market fell wildly, the gossip is that the acquisition of FTX by Coonan will trigger the U.S. antitrust review, the more real reason is that it suddenly occurred to everyone why SBF would agree to the acquisition, in fact, is to admit that FTX is insolvent, FTX’s problems are far greater than the market imagined……

Market makers reacted and took the lead in running away, FTT tokens began to plummet, and many crypto currency prices, including bit coin and ethereal, began to plummet under the negative impact of the impending bankruptcy and collapse of the head exchange in the crypto currency world, and have been falling until now ……

First, let’s briefly talk about SBF and his FTX exchange.

Born in 1992, SBF just turned 30 this year and worked at Jane Street Capital (Jane Street) on Wall Street before he joined the crypto currency world in 2017. Because of his experience in quantitative trading on Wall Street, he founded Alameda Research, a crypto currency quantitative trading firm, in 2017 and has been in the crypto currency world ever since. SBF is known in Simplified Chinese crypto currency circles as “Exploding Head” because of his often unkempt appearance and long, unkempt hair.

In 2019, SBF set up FTX exchange based on his investment from Wall Street Capital, and today’s number one exchange in the global crypto currency world, Finance (Coonan), was also one of FTX’s early investors.

Since its inception, FTX has quickly attracted the attention of the crypto currency crowd with its amazing development speed, appropriate aggressiveness, innovative products and cultural uniqueness. In addition to brokering transactions, it also offers a range of complex financial derivatives, which has allowed FTX to expand by leaps and bounds, gaining a valuation of up to $30 billion in just 26 months, and its daily trading volume on global exchanges is firmly in the top three. With crypto currency trading volumes reaching this scale, it’s almost safe to say that FTX has turned into a super money printing machine.

Not only that, with the power and capital of Wall Street, SBF has also extended its tentacles to the crypto currency world, using the traditional financial method of playing in the crypto currency world, SBF has invested heavily in a series of famous companies in the crypto currency world, such as DAO Square, Palos, Mask Network, airdropped tokens issued by companies such as Layer Zero and Betided, invested in Yuga Labs, Doodles and other NFT companies, invested in Solana, Celestial, Mina and other public chains, as well as Para Swap, Dodo, Saddle, Trust Token and other decentralized financial applications, in addition to specialized wallets, decentralized exchanges, in particular, FTX has also invested in one of the most important stable coins in the crypto currency world today One of the most important stable coins in the crypto currency world today, USDC (created by Circle, a company backed by JP Morgan Chase).

Just a month ago, at the beginning of October, SBF was interviewed by the famous American business magazine Fortune and was placed on the cover of the magazine with the title “The Next Warren Buffett”, symbolizing that SBF has become a representative figure in the crypto industry and that his FTX has become one of the most influential crypto companies in the world. The title of the interview is “The Next Warren Buffett”, which symbolizes that SBF has become a representative figure in the crypto industry, while his FTX has become one of the most influential crypto companies in the world.

In the midst of the crypto currency crash since April 2022, when a massive run on funds triggered a liquidity crisis in many exchanges, FTX has expanded against the trend, and through a series of mergers and borrowings, has earned the title of “central mom of the crypto currency world” and the last borrower of the crypto currency world. -According to Fortune magazine, this is probably a practice of Warren Buffett’s famous saying: I am greedy when others are afraid.

SBF also made a point of explaining his share acquisition strategy in an exclusive interview with Fortune.

“Our mission is not to make any amazing acquisitions, the logic here is to make some reasonable deals, even deals that are a little bad but we can and think about things from the point of view of what’s good for both sides, and then we can start thinking about how to share the cake together.”

And, SBF also said that.

“The worst of times are behind us.”

It was through this acquisition spree in a time of market recession, as shown above, that SBF built a massive FTX crypto currency ecosystem loop.

But what SBF doesn’t know is that the worst moments of the crypto currency ecosystem are not behind him, precisely because of his own and FTX’s acquisitions.

Within such a short time of its inception (just 2 years), FTX was able to strike out all over the crypto currency world, relying not only on profits and financing from the issuance of FTT tokens, but also on massive borrowing, debt, and, well, all the money of the customers who traded in FTT.

Simply put, FTX misappropriated a large amount of customer funds, and a significant portion of those assets were transferred to Alameda Research, the company originally created by SBF, and it was through Alameda Research that FTX made many acquisitions and investments abroad.

On November 2, the crypto currency industry website Coin desk posted an article dissecting Alameda Research’s balance sheet based on a private financial document they reviewed.

The majority of Alameda’s assets are the FTX platform token FTT. as of June 30, Alameda had $14.6 billion in assets, with the largest single asset being FTT worth $3.66 billion, other significant assets including $3.37 billion in SOL eco and its Solana token, and a full $8 billion in liabilities, primarily $7.4 billion in loans.

Thinking about the death spiral of the Luna ecosystem five months ago and the subsequent liquidity crisis suffered by the famous Three Arrows Capital in the crypto currency world, the market immediately became worried about FTT’s liquidity and the FTT token price then slowly fell. Then, Coonan’s co-founder He Yi said that he had sold 20% of his FTX stake, which further fueled market concerns about FTX and Alameda’s finances.

 

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