November 11, 2022 | Read Online

The Darkest Timeline - FTX goes boom

Community is a show you probably haven't heard of - but it was one of my favourite tv shows growing up. In one of their best-written episodes, the main characters are sitting around a table and they roll a die to decide who has to go downstairs and collect the pizza delivery. This creates six different timelines. For each different number that comes up, there is a completely different series of events that follow.

In one of those timelines, everything goes wrong - the darkest timeline.

Well in light of this week's events, it may be time to start believing that the crypto world is in its darkest timeline.

Crypto's one-time wonderboy Sam Bankman-Fried (SBF) has suffered a staggering fall from grace. At the start of this month, he had a net worth of $18 billion. Earlier today, 10 days later, he declared bankruptcy.

He was the founder of FTX, the second-largest crypto exchange in the world and Alameida Research. The source of the problems began when a coindesk article revealed that these two companies might be a bit too closely linked. The article shed light on the fact that around 40% of the assets on Alameida's balance sheet were in the form of FTT - which is the FTX exchange's token.

Alameida was using its stash of FTT as collateral so it could borrow customer funds from FTX. This was a big risk. It meant that if the FTT were to crash in price, it would take down Alameida research, and Alameida would in turn take down FTX.

After hearing this, Binance's founder CZ took the decision that Binance would sell off its entire holdings of the FTT token. And it held A LOT. It was selling $2 billion worth of FTT tokens back on the market.

The price of FTT crashed as other investors followed Binance out the door. Then SBF said in a since-deleted tweet:

If there’s one thing I’ve learned during my time in this space - it’s that when the CEO of a web3 company has to say things are fine, things are usually not fine. In the end, the selling pressure was too much and FTX had to pause withdrawals. That meant that some of those poor investors who had put money into FTX couldn’t get it out.

FTX is HUGE - the second biggest exchange in the world - so news of its troubles rocked the whole ecosystem. In one day, this is how far prices fell:

SBF was a big backer of Solana, so on this news SOL tokens fell 43%
BTC -16%
ETH -24%
MATIC - 27%

Binance, the largest crypto exchange in the world, came in with a deal to buy FTX. But after thinking about it further, they said thanks but no thanks. And on further inspection, you can understand why. It turns out that FTX has a $10 billion hole in its balance sheet. Now Justin Sun, the founder of Tron who is not exactly well-liked in the industry, is trying to bail out FTX.

This is an evolving situation which could go many different ways. There are in fact many new timelines branching off of this one. If FTX can't raise money from anywhere, they'll have to file for bankruptcy. This will cause huge ripple effects for lenders who lent to FTX, and others in the industry. FTX's legal team have all quit - always a good sign. So there may also be lawsuits coming. As dark as this timeline currently, it could get even darker. Strap in folks

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Market Mix - The Darkest Timeline - FTX goes boom

The Darkest Timeline - FTX goes boom

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