FTX’s monumental collapse will go down as one of the greatest corporate scandals of all time. But, at least Sam Bankman-Fried, or SBF, is sorry. On Nov. 22, the disgraced founder of FTX wrote a letter to his former employees outlining his role in the company’s bankruptcy. “I never wanted this to happen,” he wrote. “I didn’t realize the full extent of the margin position, nor the magnitude of the risk posed by a hyper-correlated crash.” Get this: SBF still thinks the company can be saved because “there are billions of dollars of real interest from new investors.” Shouldn’t he be concerned about trying to avoid jail right now?
Bitcoin (BTC) and the broader crypto market have been rocked following the scandal. While this has allowed many diamond holders to accumulate more BTC cheaply, institutional investors are taking advantage of this opportunity to short the market. We could finally get that final surrender to complete the current four-year cycle.
As always, this week’s Crypto Biz newsletter provides all the latest high-level trading news from our industry.
Sam Bankman-Fried says he’s ‘deeply sorry’ for collapse in letter to FTX team
SBF’s letter to former FTX employees painted a picture of a deeply remorseful founder who managed to squander billions through excessive margins and poor oversight. He also blamed the “race to the bank” for FTX’s ultimate demise. For those of you following, the bank run mentioned by SBF was sparked by Binance CEO Changpeng Zhao, who on November 6th revealed on Twitter – of all places – that he would be selling for 500 million dollars worth of FTX tokens. This announcement sparked a tidal wave of redemptions on FTX as users rushed to the exit. Within 48 hours, FTX was found to be insolvent.
FTX owes over $3 billion to its 50 largest creditors: bankruptcy filing
The hole in FTX’s balance sheet is estimated to be around $8 billion – and much of that is owed to just 50 people. New bankruptcy filings in the state of Delaware confirmed this week that FTX’s top 50 creditors owed a total of $3.1 billion. One individual owes more than $226 million, while the rest of the top 50 had between $21 million and $203 million on the failed derivatives exchange. So when can FTX’s creditors expect to get some of their money back? It could take years or even decades, according to insolvency lawyer Stephen Earel.
FTX reveals that its top 50 creditors owe $3.1 billion.
The largest creditor owes $226 million.
All names have been redacted. pic.twitter.com/JGeddvMB7w
— Tom Dunleavy (@dunleavy89) November 20, 2022
FTX crisis drives record inflows into short-term investment products
Believers in bitcoin as a solid monetary alternative to the current monetary regime have used the latest market crash to hoard more BTC. But, for some institutional investors, the FTX collapse triggered a new short selling opportunity. According to CoinShares, 75% of institutional crypto investments last week went to short investment products. In other words, they are betting that Bitcoin and other crypto assets will see a further drop in price. BTC has already plunged to around $15,500, marking a new low for the cycle. Although Bitcoin could go much lower, we are nearing the end of the current four-year cycle. Thus, the bottom could be near.
US Senators Urge Fidelity to Reconsider Bitcoin Deals After FTX Blast
Fidelity Investments, a leading institutional funder of digital assets, is being urged by members of Congress to limit its bitcoin investment offerings. This week, Senators Elizabeth Warren, Tina Smith and Richard Durbin again called on Fidelity to reconsider its Bitcoin 401(k) product offering in the wake of the FTX disaster. “Since our previous letter [from July 26, 2022], the digital asset industry has only become more volatile, tumultuous and chaotic – all hallmarks of an asset class that no plan sponsor or retirement saver should want to approach,” wrote the senators. Crypto-skeptics can take their victory lap for now, but Bitcoin will have the last laugh.
The FTX implosion has made it clear that the digital asset industry is in serious trouble. I joined @SenWarren & @SenTinaSmith to urge Fidelity to do what is best and reconsider its decision to expose retirement accounts and employer-sponsored plans to these volatile assets. pic.twitter.com/qQn4PF80AP
— Senator Dick Durbin (@SenatorDurbin) November 21, 2022
Before You Go: Could Grayscale Trigger the Next Bitcoin Price Crash?
Concerns about Grayscale’s Bitcoin Investment Trust (GBTC) began to mount last week after the company refused to provide on-chain proof of its reserves. Now, investors are worried about whether Grayscale’s parent company, Digital Currency Group (DCG), could be forced to liquidate some of its GBTC to cover a massive hold in Genesis Global Trading’s balance sheet. What is the relationship between DCG, GBTC and Genesis? In this week’s Market Report, Marcel Pechman and I discuss this relationship and why it matters to Bitcoin investors. You can watch the full replay below.
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