Madman said

The market trend analysis was correct in the process, but wrong in the result. There is only one word: miserable! Too many things happened on this day, which is enough to be recorded in the history of the cryptocurrency circle again. Let's follow the timeline and make the next plan according to the market, because FTX's rapid thunderstorm will redefine the market and re-expect the future. There are too many variables that madmen cannot predict, so the final small probability becomes a reality. It is true that the lack of skill leads to a wrong prediction.

First of all, what everyone saw before going to bed last night, CZ said that he intends to fully acquire FTX and help deal with liquidity crunch, signed a document without legal effect, and will conduct due diligence in the next few days, and can also choose to withdraw from the acquisition at any time. This is the result of SBF's pleading with CZ, which is exactly what CZ wants, so he took advantage of the situation and initiated the acquisition. We saw the market reverse and rise to around 20700, BNB rose from 320 to 400 in an instant, and FTT rose from 14 to 22 at that time. The market felt relieved and reversed.

But the good times didn’t last long. After everyone went to bed, some law professors believed that CZ’s acquisition of FTX would involve antitrust investigations and violate the Sherman Act. The market expected that the acquisition would most likely fail. At the same time, FTX equity institutional investors were worried that the equity value would be zero after the acquisition by Binance, because the funds acquired by Binance were mainly to help FTX solve liquidity, rather than FTX equity value. The market believed that FTX shareholders would work together to prevent SBF from selling, which was the second blow. In addition, a data exposed by Reuters showed that FTX had suffered a withdrawal shock of more than $6 billion in the past 72 hours, and at that time FTX had announced that all cryptocurrencies would stop withdrawals. The market speculated that FTX’s funding hole was as high as $6 billion. SBF also deleted FTX’s tweets that were enough to cover all user assets. With the three factors combined, the probability of acquisition was almost zero! FTX was also completely sentenced to collapse, causing extreme panic in the market. FTT was the first to start the plunge mode, triggering a series of panic capital flight (the butterfly effect will be explained later). This is the framework of the whole incident. Let’s talk about the details.

First of all, we have to talk about Alameda, an affiliate of FTX. I just saw its balance sheet, which shows that it has $3.6 billion unlocked FTT and $2.16 billion pledged FTT. In addition, it is worth noting that there are more than $5 billion in others. On the liability side, it shows $290 million locked FTT (locked assets have become liabilities?), and $7.4 billion in cash (obtained through various mortgages or loans). This explains why after FTX's funds were cut off, FTT fell like a death spiral like LUNA. The reason is the liquidation of leveraged loans, which caused the collateral assets to explode and return to zero, and the $5 billion others it held became the largest escaper of small coins in the market. According to on-chain data, Alameda's remaining assets are only $200 million, down from $14 billion in total assets to $200 million, becoming the culprit of the short-term market crash. But the nature of FTT's plunge is completely different from that of LUNA. FTT is more like a centralized blind box, and its plunge was caused by SBF in a illegal and deceptive manner, while LUNA was caused by the arbitrage mechanism on the chain. As long as you learn enough and understand the operating model, there is a chance to escape. If the two are compared, it is obvious that the crime committed by SBF is far greater than that of Do Kwon.

Madman said one more thing. Yesterday, I predicted that Wall Street would acquire and CZ would make good judgment for the sake of interests. In fact, there was no big problem in essence. I still followed this script before going to bed. The problem was that the speed and magnitude of FTX's thunderbolt exceeded everyone's expectations. The empire of hundreds of billions collapsed overnight. It would take at least 3-6 months for Wall Street to acquire it. It was simply too late. It's no wonder that SBF went to CZ for help, but CZ probably didn't calculate the antitrust step well. He wanted the boss to swallow the second, but was shocked by the antitrust law and its huge hole. The current regulatory agency CFTC said it was paying close attention to the FTX incident, but did not clarify any regulatory issues. CZ did not explain whether there would be further acquisitions or due diligence results, but this seems to have been clearly put on the table, so don't expect this merger to be successful. Believe the fact that FTX has already collapsed. At this time, SBF's net assets evaporated by 93% in one day, from US$16 billion to US$991 million. It is estimated that not a penny can be saved with the remaining amount used to repay debts.

For the future market, the companies that have loan relationships with FTX and Alameda are more troublesome. Because the money cannot be taken out, the money loaned to these two companies has become bad debt. We don’t know whether this will trigger a chain liquidation like LUNA’s collapse of Three Arrows Capital, but I guess there will be, because the amount of funds is huge and there must be chain leverage involved. It depends on which companies announce the collapse later. The situation will develop further. Therefore, the market’s selling liquidation has not yet ended, which will also keep the market on the edge of danger in the short term. Investor confidence has been severely frustrated. If the demand cannot keep up, once the liquidation supply comes in, it will continue to fall. These are all unexpected. Let’s wait and see this week. I hope there will be no bigger black swan events, otherwise the bulls will not have an easy time.

FTX, the second largest exchange, went bankrupt, which is good news for all centralized exchanges, especially Coinbase in the United States. The website was down today due to excessive registrations and visits. Expectations for future stock price increases have increased, and today should be considered a wrong target. In addition, various exchanges have also announced new plans:

Binance: Recharge the safe asset fund to the equivalent of $1 billion and will soon start Merkle tree reserve proof to ensure full transparency;

OK: Plan to publicly release auditable Merkle tree reserve proofs in the coming weeks to further build trust in the industry;

Huobi: We will prepare Merkle tree reserve proof again. It is very important to ensure the transparency of the exchange. At the same time, Brother Sun said that Huobi and Tron DAO promised to permanently redeem all FTX Tron tokens. As a result, the Tron system exploded. Although Brother Sun was late, he arrived. This move will cause people with funds in FTX to withdraw funds to buy Tron system, which is a repeat of the old trick.

Crypto.com: The company has less than $10 million of its own funds deposited in FTX, which has minimal impact. It has always maintained a 1:1 reserve and has not engaged in lending or operating hedge funds.

NEXO: Net exposure to FTX and Alameda is 0, withdraw all assets. This company was mentioned by a madman yesterday, and $220 million was withdrawn at the first opportunity. Awesome!

COBO: Recently launched the MPC co-management solution, with multiple parties keeping private keys in shards to ensure the transparency of platform funds. COBO is a decentralized wallet;

Coinbase: does not hold FTT, has a deposit of $15 million in FTX, reiterates that there is no liquidity or credit risk, and can view 1:1 holdings of user assets in public audited financial statements;

Bybit: Thanks to Alameda for transferring 100 million BITs to the chain. He has become the biggest clown in this exchange. He exchanged equivalent platform coins with FTX and locked them for three years. As soon as he thanked them, FTT fell by 90%. I am afraid it will return to zero after the three years expire. In the business world, don't talk about feelings, just focus on interests.

The story of FTX is too long, so I will stop here on this page and start writing the next page, which will be updated every 30-60 minutes.