FTX had more than 3.1 million users at its pean in November 2021 and over. A year later on November 11, 2022, FTX filed for bankruptcy. Though there was a hold on withdrawals, users still managed to find a loophole. Some might get their funds back, some may not. But all of them would need a reliable crypto exchange. We have curated a list of top crypto exchanges that can be better alternatives for FTX.

Our Criteria

We have chosen a few criteria which helped us select the best alternatives for FTX. Keeping in mind the collapses of previous exchanges like Vault and FTX, we have chosen the criteria of proof of reserves. Further, exchange volume also plays a significant role because an exchange on which people trade rarely, is more likely to capitulate.

1. Proof of Reserves

The criteria is very simple, we have chosen those crypto exchanges which have proof of reserves. The concept is simple, reserves can be shown to the general public. These reserves would mean that the company can support all withdrawals even if most users decide to withdraw at once. This is similar to conventional banks who have partial reserves to prepare for a bank-run, in case it happens.

Simply, Proof of Reserves are a way of saying that, “we can give your crypto back to you whenever you want it back“.

2. Exchange Volume

Exchange volume is very essential when you trade cryptocurrencies. It helps you get better buying and selling prices due to competitive bidding. Further, exchange volume also shows that people have trust on that exchange. But using just Volume as a counter would be fatal like in the case of FTX.

Therefore, we have combined both of them together to find a good exchange that has some tangible proof of its crypto reserves and has high transaction traffic.

FTX Alternatives with Audited Proof of Reserves

We have ordered exchanges according to the reliability of their proof of reserves data. Kraken has audited reserves while BitMex has self attested data. Crypto.com and Binance have promised to release data in near future.

1. Kraken

Kraken has an auditor assisted Merkle Tree based proof of reserve. It was last updated in November 2022. A Merkle Tree is a data structure which confirm the existence of previous values through cryptography. Change in any root value would change the final Merkle calculations. It is also the best FTX alternative currently according to our view.

Kraken further secures individual accounts through Proof of Reserves. This means that each user can verify whether their funds are included in proof of reserves. They can do so through the following steps.

Login and navigate to settings.

Choose Accounts.

Selects Audits Tab and then choose Audit type.

For a detailed Kraken Review, see our guide on Kraken Exchange.

2. BitMex

BitMex has provided a self attested proof of reserves and liabilities on November 9, 2022. Unlike Kraken, it does not involve complexities like Merkle Tree data structures. It just simply has a downloadable 200 MB YAML file. The last verification date had 75,914.7 Bitcoins as assets and 75,758.3 Bitcoins as liabilities. Overall the exchange appears to be able to honor all commitments at least on paper. However, it is notable that it is a self-attested declaration and is not verified by any third-party.

The exchange ranks 42 in terms of exchange volume.

3. Crypto.com

The exchange had announced that they had sufficient reserves well above their user deposits. Further, they have sufficient US Dollar and other stablecoins to honor commitments. As of now, it appears that their stablecoin reserves are above $500 Million. The exchange is among the top 20 crypto exchanges with respect to volumes.

Below is a screenshot posted by their CEO Kris.

As mentioned in my CNBC interview yesterday, https://t.co/pFc4Pz9nFR is sitting on plenty of our own capital held in USD and stablecoins above the 1:1 reserves we keep for client funds. https://t.co/8ipDou3JxK

— Kris | Crypto.com (@kris) November 16, 2022

Crypto.com has successfully recovered around $990 Million worth of cryptocurrencies from FTX. They have further announced that they will soon release a proof of their reserves.

4. Binance

Binance is the largest exchange and has more than 15 Million active visitors per week on the exchange. The exchange CEO Changpeng Zhao is one of the most vocal supporters of proof of reserves to verify exchange liquidity and reserves. He has tweeted in favor of proof of reserved and announced that Binance will also publish the reports soon.

When Binance publishes those proof of reserved data, it would become the best FTX alternative.

All crypto exchanges should do merkle-tree proof-of-reserves.

Banks run on fractional reserves. Crypto exchanges should not.@Binance will start to do proof-of-reserves soon. Full transparency.

— CZ 🔶 Binance (@cz_binance) November 8, 2022

Binance was also supposed to be the FTX rescuer but the deal supposedly failed because of FTX’s unhealthy balance sheet.

Conclusion

“Not your keys, not your crypto” is one of the most popular sayings in Web3. However, for everyday users keeping funds in exchanges not only lets us HODL but also helps us trade with our crypto as collateral. Margin trading would be lot difficult if everyone decided to take their crypto off-exchanges. Therefore, we need exchanges that can keep our crypto safe. Proof of Reserves is definitely a bold step towards greater transparency and greater adoption.

Solana’s price has fallen more than 63% in just a month. It reached $38 on November 5, 2022, and has now fallen to the levels of $14-$15. Solana fell on speculations that FTX and Alameda would dump their share to raise funds after bankruptcy. This, combined with on-chain data shows a very bad near-term future for Solana.

Also Read:  Solana Technical Analysis: Coin Might Crash Further as Unstaking Nears

Unlocked SOL in FTX and Alameda

FTX Exchange collapsed in a dramatic series of events with Binance CEO Changpeng Zhao making a failed rescue attempt. One of the most devastating spillover effects was for Solana. Both FTX and its sister firm Alameda Research hold vast amounts of $SOL Tokens in their balance sheets.

FTX holds about $982 Billion in $SOL Tokens

Alameda Research holds an additional $292 Million in $SOL Tokens

The current Solana Token supply is near $5.1 Billion. The sale of additional tokens worth $1.3 Billion would increase the market supply by 20% which could result in a 20% further drop in Token Value if prices are to adjust accordingly.

Why is On-Chain data important?

On-Chain data shows the most reliable and accurate state of a cryptocurrency. Since it is reported without any human interference, on-chain data does not have any bias. Further, it also shows the state of the cryptocurrency and blockchain in real-time.

On-Chain data gives you critical market insights that set you ahead of others. It also shows you where the smart money flows. Smart Money refers to funds that are controlled by top financial institutions, large firms, and top investors.

Solana On-Chain Data

We have compared Solana’s on-chain data with Ethereum to show that the data for Solana looks particularly bad and is not the secular impact of Crypto Winter. The data for the first 3 metrics were taken from The Block.

Data shows that Solana has seen an overall decline in its adoption in the last 3 to 6 months. Further, the decline has been consistent without any recovery. The same effect is not seen in Ethereum which has also declined not by such a huge margin as Solana.

1. Lowest Number of New Addresses in 6 Months

October 2022 saw the lowest number of new addresses on the Solana blockchain. More than 11.72 million new addresses were created in May 2022 as compared to just 5.52 Million new addresses in October 2022. Further, there was a decreasing trend since May. Compared with Solana, Ethereum added 2.79 Million new addresses in October and 2.5 Million new addresses in May, which is a net increase.

2. Lowest Number of Active Addresses in 6 Months

Solana had more than 37 Million active addresses in May 2022. However, that figure dropped down to 50% to reach about 18.17 Million active addresses in October 2022. Meanwhile, Ethereum saw just a 7.9% fall in the number of active addresses.

3. Regular Transactions Fall to 3-Month Low

Regular transactions on the Solana chain are those which interact with Solana blockchain through direct transfers or through DApps. Solana Blockchain marks the lowest levels of regular transactions in the past 3 months. The daily transactions were 9.63 Million transactions on November 14, 2022, as compared to 36.18 Million transactions on August 14, 2022.

Ethereum saw no net change that was considered during this period. On August 14, 2022, there were 1.14 Million Transactions as compared to 1.13 Million Transactions on November 14, 2022.

Conclusion

Solana has dropped more than 60% in the last month but that drop was largely incoming as we can see from the slow decline which started in the last 6 months. Crypto Hodlers and Investors are best advised to stay away from Solana and monitor the situation closely. Any significant price drop can further aggravate your loss.

Disclaimer: We are not criticizing any project. We are just pointing out the unfavorable situation.

QUICK TAKE:

LFG shares a technical audit report conducted by JS Held, a third-party auditing firm

All Luna Foundation Guard funds were spent to defend UST’s peg parity with the Dollar

The report dispels the allegation of embezzlement or misuse of funds 

On November 16, Luna Foundation Guard (LFG), the entity supporting the Terra ecosystem, today released the much-awaited technical audit report. The report was conducted by JS Held, an experienced third-party auditing firm. Notably, the report provides “full transparency” into the trading, blockchain records, and efforts of LFG and TFL to defend the price of TerraUSD ($UST) between May 8th & May 12th, 2022.

Terra’s algorithmic stablecoin UST lost its peg to the dollar in May this year. Consecutively, both UST and Terra’s governance token Luna ended up falling to near-zero levels. The contagion spread by this collapse is still being felt across the crypto ecosystem. The black swan event toppled several crypto firms with UST exposure while wiping $60 billion from the market. The community has since questioned LFG about its role in preventing UST’s collapse, but a full audit has only become available now.

As per the report, LFG spent $2.8 billion to defend UST’s peg in May. This included 80,081 BTC and 49.8 million in stablecoins. Moreover, the report also claimed that Terraform Labs, the Terra blockchain developer, spent $613 million of its own capital defending the peg.

6/ The audit concluded that:

➡️ LFG spent $2.8B (80,081 $BTC and 49.8M in stablecoins) to defend $UST’s peg, consistent with LFG’s tweets on May 16th, 2022

➡️ Additionally, TFL went above and beyond and spent $613M of its own capital to defend the $UST peg

— LFG | Luna Foundation Guard (@LFG_org) November 16, 2022

LFG Denies All Allegations

Moreover, as per the tweets by Luna Foundation Guard, all LFG funds were spent to defend UST’s peg parity with the Dollar. Notably, LFG’s remaining balances are the only funds left with the entity. Further, the tweets said that this will naturally dispel all the allegations. LFG claims that the community has “put the wrong thing” about them based on the following information:

Embezzlement or misuse of funds → all funds were used for peg defense

LFG funds used to benefit insiders → all peg defense occurred in open markets, with no special preference for any party

LFG funds frozen by law enforcement → all LFG funds are kept in self-hosted wallets, have not moved since the May 16th tweet, and have not been frozen

Furthermore, TFL fully funded Luna Foundation Guard’s asset fund in order to create a secure escrow fund for Terra’s stablecoins, the report said. For the reasons stated above, the TFL concluded:

12/ While those reserves were unfortunately insufficient to defend against extreme market volatility and eventually led to $UST depegging, LFG lived up to its mandate fully to do everything within its resources to prevent that outcome.

— LFG | Luna Foundation Guard (@LFG_org) November 16, 2022

Do Kwon, the founder of Terraform Labs, also brought up the recent FTX ecosystem collapse to defend his own platforms. He said,

While there have been multiple recent failures in crypto, it is important to distinguish between Terra’s case, where a transparent, open-source decentralized stablecoin failed to maintain peg parity and its creators spent proprietary capital to try to defend it, and failure of centralized custodial platforms where its operators misused other people’s money (customer funds) for financial gain.

He added,

We hope that this report shows our organizations’ commitment to transparency and the wider crypto ecosystem, and we are more committed than ever to learn from our failure and continue to build systems that are more transparent, decentralized, and resilient.

QUICK TAKES:

FTX drainer holds large amounts of ETH and BNB digital assets

The attacker has been swapping BNB and DAI for ETH, becoming Ether’s 34th largest holder

The move is proving to be beneficial for arbitrageurs leveraging the price fluctuation 

The recent FTX meltdown was known to create a massive shift in the market but it seems that it is providing a safe passage for hackers to conduct mischief. Immediately after FTX filed for bankruptcy last week, $400 million was withdrawn from the crypto exchange without any account. Speculations of the platform getting hacked were soon raised and crypto sleuths have been keeping track of the funds since.

The crypto analyst account, Lookonchain, which has been observing the activity of the FTX drainer’s account, recently reported another movement. After a significant shift of funds, the FTX drainer is now the 34th-largest holder of ETH after becoming the 10th-largest holder of BNB.

The FTX exploiter, who has been dumping all other drained assets for ETH, is now one of the largest holders in the world, with 228,523 ETH ($284.82m) currently in their wallet.

Everyone should keep an extremely close eye on what happens next… pic.twitter.com/SAP3UkyVaa

— Dylan LeClair 🟠 (@DylanLeClair_) November 15, 2022

Till yesterday, the account held 228,524 ETH worth $288 million and 108,454 BNB worth $30 million. However, earlier today, it swapped a total of 34,000 BNB for 4,500 ether and three million Binance USD (BUSD). Additionally, it holds at least $322 million in cryptocurrencies, 87.5% of which is made up of ETH.

The firm has raised speculation that the drainer’s next move might be to swap the remaining BNB and an additional 1.7 million DAI stablecoins it held for ETH. If the move happens, it would be beneficial for arbitrageurs as they will be to purchase BNB from the same pool only to sell it at a profitable margin. However, they might face interference from HODLers who are hopeful for a positive shift in the market. 

Is ETH Dump Incoming?

Nevertheless, arbitrageurs have already jumped at the opportunity, with one recently making a profit of over $50,000. This is after the FTX account drainer dumped 10,000 BNB worth $2.8 million into the ‘0x74e4’ pool yesterday. At the same time, Lookonchain noticed that a bot exchanged 450 ETH for 2,390 BNB from the same pool.

The bot then dumped 2,185 BNB for 452 ETH back through another pool ‘0x5bf6’ pool. This allowed the trading bot’s owner to make an arbitrage profit of 208 BNB, which was worth $56,790 at press time. 

Analysts are still determining the FTX drainer‘s next move as the account is currently holding over 233,000 ETH. They speculated that hackers would usually deposit the funds into Tornado Cash crypto mixer, but it won’t be possible this time.

This is after the U.S. Treasury Department announced sanctions against Tornado cash earlier this year. Therefore, the attacker won’t be able to deposit such a huge amount without getting monitored. It also will not be possible as Tornado cash is currently holding 95,562 ETH, which is way lesser than the drainer’s account. This would make it impossible to evade suspicion while depositing huge troves of ETH on Tornado.

What’s in it for Arb Traders? 

The other option for the drainer would be to dump all the $ETH at once, which may cause a huge price fluctuation. Elaborating on the same, Lookonchain wrote, 

In the worst situation, FTX Accounts Drainer shorts $ETH using high leverage, and then dumped 228,524 $ETH ($288M) to drive the price down.

However, traders may find it an ideal opportunity to carry out arbitrage trades as the ETH price fluctuates. Traders can purchase the low-priced ETH dumped by the drainers, and then sell the tokens at a higher price on decentralized protocols and pools.

QUICK TAKE:

FTX founder SBF finally cleared the air about some cryptic tweets he made this week 

FTX has $9 billion in illiquid assets, which SBF admitted may have a lesser fair market value 

There was gossip on Twitter earlier suggesting SBF’s weird tweets were an attempt to cover his trail  

Sam Bankman-Friend, the founder of the bankrupt cryptocurrency exchange FTX, forced crypto Twitter to solve a puzzle over the past day. He started posting random letters on Twitter on November 14, which were perplexing at first. Many thought the founder had either been hacked, was doing drugs, or had simply lost his mind.

However, on November 15, these letters posted by him over a 24-hour span finally spelled “WHAT happened”. Further, the following tweets became partly self-confessional and partly attempts to explain to the public the last situation of FTX before the thunderstorm. He made another tweet on November 16 which finally made some sense.

SBF first highlighted the fact that just a few weeks ago, FTX was handling $10 billion in volume and billions of transfers in a day. However, he added that the company had more leverage than he realized. Thus, the ensuing bank run and market crash exhausted the exchange’s liquidity. So what can he do to remedy this? “Raise liquidity, make customers whole, and restart,” said SBF, who thinks he has failed enough for one month.

16) Maybe I'll fail. Maybe I won't get anything more for customers than what's already there.

I've certainly failed before. You all know that now, all too well.

But all I can do is to try. I've failed enough for the month.

And part of me thinks I might get somewhere.

— SBF (@SBF_FTX) November 16, 2022

SBF Shares Future Goals

But first, SBF has to sort out the company’s current financials, as it reels with a large hole and an inability to make users whole. As per his tweet, FTX has liquid assets worth $8 billion, semi-liquid assets worth over $5.5 billion, and Illiquid assets worth over $3.5 billion.

Although, he added that the $9 billion in illiquid assets may have a much smaller fair value based on the current market price. This is because many of them are held in Solana-based tokens like MAPS and OXY. These tokens have a low liquidity market and have been sliding down price charts recently. Nevertheless, he wrote,

And yeah, maybe that $9b illiquid M2M isn’t worth $9b (+$1b net). OTOH–a month ago it was worth $18b; +$10b net.

Interestingly, these numbers differed from what Zane Tackett, former head of Institutional sales at FTX shared from FTX’s balance sheet last week. As per the details shared by Tackett, FTX held liquid assets worth $900 million, less liquid assets worth $2.037 billion, and illiquid assets worth $3.2 billion.

Nevertheless, SBF believes that his current goals are to clean up, focus on transparency, and make FTX customers whole. This will be done by raising fresh liquidity, which might come as a challenge for the bankrupt firm.

SBF also said that he intends to prioritize customers over investors, giving further credence to institutions such as Sequoia and Softbank, which recently moved to mark their FTX investments down to zero.

14) My goal:

a) Clean up and focus on transparencyb) Make customers whole

— SBF (@SBF_FTX) November 15, 2022

Notably, Zhu Su, co-founder of 3AC, took a jibe at SBF’s intent to start over, commenting,

Lets auction these “assets” in a dutch auction, starting from your criminal mark price, and see where buyers show up

Clearing the Evidence Trail 

Now that the FTX founder has finally made sense of his cryptic tweets, it could put to rest several conspiracy theories that were bubbling on Twitter. Soon after SBF started posting letters on Twitter, users started speculating on the meaning of the tweets. Some suggested that the exec was posting his weird tweets while simultaneously deleting incriminating tweets posted earlier. This would allow him to surpass tweet count bots that send alerts whenever a new tweet is added or deleted.

Ok that's it, SBF is actually a supervillain. The man thinks we're all idiots, and we haven't really done anything to prove him wrong.

Turns out each tweet he posted was to cover for a tweet he deleted. Bots check tweet count and since it hasn't changed, they don't dig deeper.

— quit (@0xQuit) November 15, 2022

 

Further, as per the crypto insights platform, The TIE, SBF deleted at least 118 tweets in the previous year. It added that more may have been missed due to tweets being recorded by its software every 15 minutes, during which time SBF could have offset the difference with newer tweets.

QUICK TAKES: 

3AC co-founder Su Zhu is attempting to regain popularity on Twitter by siding against FTX 

He accused FTX employees of teaming against him and leaking his company’s positions publically 

The employees have since refuted the claims, and Crypto Twitter was not too keen on his return 

Su Zhu, the founder of insolvent hedge fund Three Arrows Capital (3AC) appears to be back on Twitter full-time. Ever since issues within the FTX empire started to surface last week, Zhu has been seen actively engaging with his huge Twitter audience, following months of absence from the social networking site. Interestingly, the exec is using this opportunity to clear his name and that of his company, after becoming the most hated man on Crypto Twitter earlier this year.

Zhu has been especially active on Twitter in the last couple of days, making leaks that could incriminate FTX, Alameda Research, and their founder Sam Bankman-Fried further. He was also seen resharing tweets that were critical of these entities. Notably, many of these tweets have also been propping up 3AC, whose implosion in June had bowled over several lending platforms. Although, 3AC had significant exposure to the FTX empire and its native token FTT, which might have added to the fund’s financial woes.

Source: Twitter

3AC’s Su Zhu Extracts Revenge

Nevertheless, he made an explosive revelation earlier today by stating that an FTX HK employee called Clement leaked 3AC’s position on the market and other details to “many people” throughout the year. This could have made liquidating their positions on the fund easier as its performance went under scrutiny. He also pointed fingers at Dan Friedberg, the Regulatory Officer at FTX’s Cryptocurrency Derivatives Exchange.

Wait so Alameda's Dan Friedberg's previous business "Ultimate Poker" was literally looking at clients' hole cards to then steal money from them?

— Zhu Su 🔺 (@zhusu) November 15, 2022

To this, 3AC co-founder Kyle Davies replied,

We were all playing poker against the house, while they looked at our cards, and used our money to bet against us.

Additionally, Zhu re-shared screenshots allegedly taken from Alameda’s Telegram group in January 2019. As per the images, Zhu, who appeared as a “Deleted Account” in the chat, was questioning Alameda’s financials ever since it came into the public eye. He highlighted that Alameda offering a 15% “high return, no risk” on lending “doesn’t really add up.” He further added,

As far as I can tell, this is a highbrow Bitconnect with better social proof. The economics are insane.

FTX Employee Refutes Allegations

The 3AC founder added that post this Telegram conversation, FTX employees incessantly bashed him for the next two months, “making it difficult to even do business.” Zhu said that he approached certain media houses with this evidence, but to no avail. In the end, he “gave up fudding” and joined hands with FTX, he said.

I gave up fudding, but didnt use them. In mid 2021 after the China ban (we were largest trader on Huobi and Okex derivs) we moved trading to FTX+Binance. FTX courted us w v generous terms, and after I saw big VC backed rds, I assumed someone there did DD and they mustve grown up

— Zhu Su 🔺 (@zhusu) November 15, 2022

 

It should be noted that the FTX employees mentioned by Zhu, Jane Tackett, and Ryan Salame, have since refuted these claims. Tackett, who recently left the post of Head of Institutional Sales at FTX, said that he joined FTX 18 months after the conversation in question took place. He further stated that Salame also worked for Circle at the time and only joined FTX five months after the conversation.

“It’s unfortunate to see @zhusu make up stories in an attempt to regain standing in the community,” Tackett said. He even added that he was not in that group chat, and hence wasn’t aware of Zhu’s discussion with Alameda.

If he has screenshots showing me standing up for alameda and trying to help them raise capital during my time as the head of otc sales at a competing desk, i would be very interested in seeing those. Seems a bit far fetched.

— Zane Tackett (@tackettzane) November 15, 2022

After his alleged lie was caught, Zhu proceeded to attack Tackett with unrelated questions, saying it was “irrelevant where you were working.” Notably, as per Tackett, he was at the time working for B2C2, which was one of Alameda’s direct competitors. Nevertheless, Zhu accused Tackett of “shilling FTT literally everyday” while bashing 3AC for missing the opportunity.

“How did the Bahamaian withdrawal thing happen btw?” he further asked the ex-FTX employee.

Cool Story Bro 

Despite the attempted re-branding, Crypto Twitter hasn’t taken too keenly to Zhu’s return. He is being accused of leveraging the current sentiment against FTX to salvage 3AC’s reputation. “Just because the attention is on SBF doesn’t mean u getting away,” one Twitter user said. Many also questioned 3AC’s eventual partnership with Alameda and FTX, which was despite Zhu being suspicious of the company’s motives.

Cool story. pic.twitter.com/uaym9HTpvX

— Avraham Eisenburger (@avr_eisen) November 15, 2022

QUICK TAKES: 

Gaming tokens across the Solana ecosystem face the FTX contagion

Top gaming projects said their exposure to FTX was “minimal” 

Trading volumes of blockchain games have also plunged 

Almost all gaming tokens across the Solana ecosystem are facing a tough time as users are losing faith in gaming projects. This comes after the collapse of the FTX empire began to spread across the web3 sector. Since many considered Solana to be FTX founder Sam Bankman-Fried’s pet project, the network is facing the heat more. In fact, SBF had previously pledged $100 million to Solana’s gaming ecosystem. However, this hardly appears to be a possibility now since his business conglomerate filed for bankruptcy. 

Amidst this loss of support, the price of gaming tokens on Solana was plunging throughout the past week. In fact, some of them plummeted even more than Solana’s native coin, SOL. 

One of the top gaming projects of the network, Aurory became one of the biggest casualties in this chaos. It is a turn-based role-playing game and its in-game token price has faced a recent downfall of more than 70% in the last seven days. However, to soothe the concerns of investors and users, Aurory took to Twitter to announce that its exposure to FTX was “minimal.” It also clarified that its treasury funds are distributed across multiple wallets. 

2/ We managed to avoid any losses during the Luna contagion, but we were exposed recently on FTX, as they were one of our market makers. This exposure was minimal, as the majority of our treasury funds are split across multiple wallets.

— Aurory (@AuroryProject) November 9, 2022

Another top gaming project on Solana is Star Atlas, which is a space-themed strategy game. It witnessed its coin plummeting more than 36% in the last week. However, the CEO of Star Atlas, Michael Wagner said that only a portion of its “liquid cash assets” had been affected.

Although, crypto games outside the Solana ecosystem have also been affected. Trading volumes of DeFi Kingdoms, The Sandbox, and Axie Infinity have also witnessed falls between 16.4% and 36.3%. 

Solana Price Behaviour 

SOL has suffered the hit of the FTX chaos the most because of its ties to Alameda Research. It was previously revealed that Alameda held large hordes of SOL on its balance sheet. As news of its insolvency grew clearer, investors rushed to dump the token before Alameda.

Consecutively, in the past few weeks, SOL has slipped from the 9th to 15th position in terms of crypto market cap. This is after the digital asset fell over 50% in the past week alone, making it one of crypto’s biggest losers. This was further accelerated by a huge unstaking event that saw millions of SOL tokens entering the market.

Crypto markets have been crashing after FTX episode. One of the previously top 5 crypto exchanges, FTX capitulated after it failed to receive a bailout from Binance. The fall of such a giant sent shockwaves across the industry. It also locked millions of dollars of crypto away from users, who are now unable to withdraw. Therefore, popular Bitcoin and Crypto maximalists like Michael Saylor(MicroStrategy) and Changpeng Zhao(CEO, Binance) are strongly advising self-custody of cryptocurrencies.

The major cryptocurrencies which crashed in the past 7 days are FTX, Solana(54%), Cronos, Algorand and Bitcoin.

We shall also explore what could be the best course of action in such a scenario. Whether you should buy more, sell or or hold your investments?

The Market Crash

Market Crash

A little more than a year ago, Bitcoin touched an all time high price of $69 Thousand. After that the markets cooled off and it appeared like profit booking. However, the markets began crashing soon. A brief relief rally occurred in March 2022 which took Bitcoin prices to a local high of $47 Thousand before it came down crashing, again.

Over the months of April, May and June there were several incidents which led to further crashes like Terra LUNA in early May, Crypto Hedge Fund Three Arrows Capital in mid-June and Voyager Capital in July.

Another major reason for the crypto bear markets is the raising of interest rates(to curb inflation) by global central banks. During the pandemic, global central banks printed excess cash to combat the lockdowns, recessions and shortage of money. The US Federal Reserve printed upwards of $4 Trillion with $3 Trillion in first 6 months of the pandemic. Similarly, the European Central Bank printed money worth $2 Trillion during and after the pandemic. This led to serious inflation and central banks began aggressively cutting interest rates. Cryptocurrencies which thrived on stimulus packages given by governments began crashing down.

Will the markets recover after a 76% crash?

Bitcoin dominates about 40% of the crypto markets. For the recovery of crypto markets, Bitcoin’s recovery is significant. Currently, Bitcoin has breached its 52-week low. Further the investor confidence on markets is extremely low. The current crash from all time high of $69,000 is 76%.

However, we have seen past drawdowns in which Bitcoin crashed up to 99% and yet recovered. Here is a look at Bitcoin’s past crashes.

June, 2011. Bitcoin rose from $2 to $32 and crashed back to $0.01. A crash of over 99%.

August 2012. A Ponzi scheme operator who stole more than 0.7 Million Bitcoin paved the way for another collapse. This time the price crashed by 56%.

April, 2013. Bitcoin crashed following an attack on Mt Gox exchange which crashed the prices from $260 to $50. A crash of over 83%.

December, 2013. China’s ban on Bitcoin led to a 50% market crash from $200 to near $100.

December, 2017 – December, 2018. Bitcoin peaked in 2017 at $20,000. The markets then started selling off in response to the hacks from Japan and South Korea. Bitcoin crashed from $20,000 to near $3000. This was a 85% crash and the largest amongst significant crashes.

March, 2020. The pandemic led to a Bitcoin selloff as people started to conserve cash for survival efforts during the time. Bitcoin crashed by 60% to reach below $4000 from about $1000 in two months(Feb-March).

May, 2021. In April 2021, Bitcoin reached $64,000 and then the market crashed as China began a crypto-crackdown and Elon Musk went back on a promise which would allow people pay in Bitcoin for their Tesla.

What should I do now?

1. Secure Your Funds

Currently the largest risk in the world of cryptocurrencies is the capitulation of exchanges. FTX Collapsed without any prior hints. Though there is a demand for Proof-of-Reserves, it would still take some time to implement. Further, in case of a insolvency, your Bitcoins can be sold off by exchanges to payoff their obligations.

Therefore, it is advised that you take your crypto off the exchanges. You can choose the following ways depending upon your knowledge and experience.

If you are a beginner, you can use wallets like Trust Wallet or Math Wallet. They are easy to use and are available for free.

Users with moderate experience can use MetaMask wallet. However, Metamask only supports ERC-20 tokens. You can store other tokens like Solana after wrapping it as an ERC-20 token. You can add supported coin via RPC Mode. Here is a guide on adding Polygon to Metamask through RPC.

You can also choose hardware wallets(cold wallets). Have a look at our updated guide on cold wallets. We have also listed top 5 cold wallets.

2. Buy little. Save Cash. Sell, if necessary.

Holding cash is very vital during these market crashes. You can hold it in the form of stablecoins or as cash in your bank. It is due to two essential reasons:

Cash helps you save from volatility of the cryptocurrency. A new trader can lose money very rapidly in crypto.

Another benefit of holding cash is that it gives you opportunity to buy cryptocurrencies when their prices are at the right point.

But how will you know when to buy? 

The answer is simple, keep visiting The Layer. We post articles around Technical Analysis, On-Chain Analysis, Critical News and much more.

Conclusion

Markets have gone through far worse market cycles and have recovered spectacularly. However, not all players survive the market crash. This is true both for companies, exchanges and common people like you and me. Bitcoin and other cryptocurrencies will surely recover once situations become favorable. Till then conserve cash and keep visiting The Layer.

QUICK TAKE:

RECUR announced the launch of another iconic NFT franchise from Nickelodeon

It partnered with Paramount Consumer Products to introduce Teenage Mutant Ninja Turtles NFTs

Nick’s previous NFT collection was an instant hit, but its popularity fizzled soon after

On November 14, RECUR announced that it is launching another iconic Nickelodeon franchise into its Web3 experience. Notably, RECUR is a platform for creating innovative, multi-chain non-fungible token (NFT) experiences.

Earlier today, the company introduced a collection based on Teenage Mutant Ninja Turtles’ non-fungible tokens. Notably, RECUR has partnered with Paramount Consumer Products for the launch. The announcement came months after the same partnership had launched an NFT collection based on Nickelodean’s iconic cartoon character from the shows Hey Arnold! and Rugrats.

It is worth noting that the Teenage Mutant Ninja Turtles Origins drop will take place on December 12 for RECUR Pass Holders. As for the general public, the drop will take place on December 13. Notably, fans will be able to purchase 10,000 digital collectibles during the drop.

Zach Bruch, RECUR Founder and CEO said,

This year has been full of nostalgic NFT launches for us and it wouldn’t be complete without Teenage Mutant Ninja Turtles. This property has spanned comic books, TV shows, movies, and so much more; I’m very excited that we’re bringing this incredible franchise and its culture into our Web3 experience. Our community is very passionate about Teenage Mutant Ninja Turtles, and we can’t wait for fans to see what we’ve been working on.

Nickelodeon NFTs

In the month of July, with the help of renowned DJ and producer Steve Aoki and the non-fungible token developer RECUR, beloved Nickelodeon characters were web3 immortalized. The digital collectibles included 12 iconic Nick characters from the Rugrats and Hey Arnold! shows.

Notably, the Rugrats and Hey Arnold! NFTs were the first-ever digital collectibles released by Nickelodeon. At the time of press, as per CoinGecko, the floor price for Rugrats and Hey Arnold NFT  was $73.15. Although, the 24-hour sales volume was 0.0 ETH. There was a total of 4142 non-fungible tokens minted.

However, the NFT collection sparked interest in the market when it was first released in July. It is worth noting that after being listed on the NFT platform OpenSea in July, the non-fungible tokens collection rose to fifth place. It was competing with collectibles such as Bored Apes Yacht Club (BAYC) and Crypto Punks. However, the joy was short-lived, as the volume of the NFT collection dropped 74.39% within days.

QUICK TAKES: 

Bitcoin miners are ceasing activity as electrical costs add to falling revenues 

Bitcoin’s electrical cost breaches for the second time in past five years

Mining companies are reporting losses in third-quarter earnings 

Bitcoin is already having a hard time surviving the crypto winter. The top crypto asset is lurking below $16,000 and is showing signs of extreme instability. As if this was not enough pressure for BTC miners, the rising energy costs have now added to their woes.

Amidst this bear run, Bitcoin’s electrical cost was recently breached for the second time in five years. This means that regular miners will now have to spend more cash for mining than the profits they are earning. In response, several Bitcoin miners are opting for turning off their rigs.

Many Bitcoin miners are now turning their rigs off.

Bitcoin's electrical cost has just been breached for the 2nd time only in 5 years. The electrical bill for the average miner is now greater than the income earnt. pic.twitter.com/0yG3pmrGKO

— Charles Edwards (@caprioleio) November 9, 2022

As per data by Glassnode analytics, there has been a sudden decline in the balance of miner wallets. It plunged by 9,402 BTC to a 10- month low of 1.826 million BTC last week. The net position of miners or the 30-day change of BTC supply held in miner addresses also slipped to -10,972 BTC, a record low since January. Crypto analysts believe that this phenomenon may continue giving miners facing high operational costs a tough time. 

Moreover, Bitcoin educator Dan Held believes that miner capitulation combined with FTX exchange’s collapse may indicate that the market has reached its bottom. Bitcoin advocate Mikael Lemberg supported the notion and said that the pattern is being repeated from previous bear runs.

Although, another crypto enthusiast pointed out that the Bitcoin hash rate has recently increased by 9.52%. This argues with the initial observation that BTC miners are pulling away. Although, this could also be due to the sudden influx of ETH miners to the Bitcoin network. 

Mining Companies Take the Fall 

Apart from individual miners, BTC mining companies are also reporting losses. Bitcoin miner Canaan today reported its 3rd-quarter earnings of $137.5 million, a 40% dip from 2nd-quarter earnings. The gross profit of the company has also plunged to $32.9 million, down by 74% from the 2nd-quarter. In a press release, the company informed that it is tightening cash management to streamline its expenses and preserve cash for production capacity. The move is to protect the company from “market conditions,” which it claims are expected to keep deteriorating. 

Another crypto mining farm, Bitfarms reported that it reduced its direct cost of production by 5% to $9,400 BTC. The company has sold 2,595 BTC in aggregate proceeds of $56 million and it has also paid $94 million in debt since June 1st. This was after the company reported a $173 million loss through operating costs in Q2. 

Canaan and Bitfarms’ disappointing financial reports follow similar drops revealed by other publically listed mining companies. Argo blockchain recently revealed a 14% drop in its H1 2022 revenue, which caused a 51% crash in its stick price. In fact, mining companies are also resorting to selling off their BTC holdings to offset losses. Earlier this year, Bitfarms and Core Scientific both sold off a significant portion of their BTC reserves. This has reversed an earlier pattern where BTC miners were the largest net holders of the cryptocurrency.

QUICK TAKES: 

Trading volume on Uniswap has surged as users flock to DeFi markets 

USDC trading on DEXes has hit a new high 

The overall negative sentiment surrounding FTX and CEXes has caused a resurgence in DeFi activity

Recently, crypto analysts have noticed a surge in the trading volume of the top decentralized exchange (DEX) – Uniswap. Users have been burning Ether on both Uniswap V3 and V2 rigorously in the last 7 days. This activity has led to the burning of more than 2300 ETH, thus making the second largest cryptocurrency deflationary. Users burned 117.51 ETH on Uniswap V3 and 34.46 ETH on V2 in the past day alone. 

The crypto community is speculating that the loss of faith in centralized exchanges is driving Uniswap’s popularity after FTX fell into a liquidity crisis last week. In fact, the recent negative sentiment around centralized exchanges has caused activity on DEXes to touch back old highs.

Due to the loss of trust in CEX, the trading volume of Uniswap increased, V3 and V2 burned more than 2300 ETH in 7d, which has caused ETH to fall into deflation. MEV robotics activity has recently peaked. The number of addresses trading USDC in DEXs also hit a new high.

— Wu Blockchain (@WuBlockchain) November 14, 2022

A lot of activity has also been noticed in the MEV bot trading sector on Uniswap as well. It suggests that investors are spending resources to gain high profits; thus making DEX’s foundation stronger. The scenario is opposite to what is happening in the open market. Investors are pulling out holdings, and exchanges are facing liquidity issues. It might suggest that like the centralized market, the crypto space is also going through micro changes that are hard to notice immediately. 

DeFi Rally Amid CEX Winter

Nevertheless, the only winner amid the current liquidity crisis is decentralized finance. A spike in users and transaction activity has been noted across DEXes in the past week. For instance, as per Nansen.ai, dYdX’s user base jumped 97% in the past 7 days, while the number of transactions spiked 145%.

The people like decentralised finance pic.twitter.com/e3acOCs5gI

— Nansen Intern 🧭 (@nansen_intern) November 14, 2022

There has also been a rise in the number of addresses trading USDC on DEXs. However, it might not be a great sign as the users of the accounts are yet to be identified. Nevertheless, the move after Tron’s USDD stablecoin lost its peg might suggest that investors are desperately attempting to save the USDC stablecoin from depegging.

For the same reason, some users are speculating that these incidents might be happening as a result of the ripple effect in the market. So far, crypto enthusiasts have learned that sudden movements in the market amid a winter cycle might not be a sign of hope. 

Although, others felt that the moves were not significant and it is the market acting on its infamous volatility.

Uniswap’s Journey This Year 

The Uniswap DEX has had an interesting year as it has witnessed both new highs and lows in terms of trading volume. In March, the exchange reported the lowest trading volume in the DEX’s history recorded since September 2021. It plunged by 5% in just 31 days. It also witnessed a complete reversal of the scenario when its trading volume surpassed $1 trillion and its average value surged from $200 to $2400 in May.

At press time, Uniswap’s TVL was noted at $3.8 billion, with a 24-hour trading volume of $1.3 billion.

QUICK TAKES: 

USDD depegged last week and is showing no sign of recovery 

Founder Justin Sun says the Curve pool is operating normally; evidence shows otherwise

Justin Sun speculates Alameda is behind USDD depegging 

Tron network’s USDD stablecoin depegged on November 9, 2022, and fell below 97 cents on several cryptocurrency exchanges. It lost its 1:1 ratio with the US dollar and at the time of writing, it was trading at $0.978161, with no signs of recovery. Investors are now questioning the health of the “overcollateralized stablecoin” and whether it can weather this storm. 

Notably, USDD accounts for 81.25% of the decentralized finance protocol, Curve. Therefore, the liquidity pool of the stablecoin is highly imbalanced. It shows investors attempting to pull out their holdings after the de-pegging incident. 

Crypto analyst “resdegen” started the question of whether Tron will have to sell its holdings of 14,000 BTC as almost 990 million of its USDC is stuck in JustLend. After accounting for deposits and liabilities, the network can only withdraw $660 million, they said. Responding to this, the founder of the Tron network, Justin Sun, said that the liquidity pool is functioning at a healthy rate. He also speculated that the imbalance was caused by Alameda selling its USDD holdings. 

USDD Collateral Under Scrutiny

An on-chain crypto sleuth, “lookonchain”, also researched the USDD incident independently. It claimed that the stablecoin is not safe as its reserves have decreased by $548 million USDC. It also explained how Tron has been lying to its users. 

9.

So the total assets available in the treasury are 139M $USDC and 14,040.6 $BTC ($225M).

A total of $364 M of assets.

But the total supply of $USDD is $725M.

The Collat. Ratio is only 50%! pic.twitter.com/vMX52amIPe

— Lookonchain (@lookonchain) November 14, 2022

It took to Twitter to break down that even after de-pegging, USDD had $990 million in its reserves. Sun utilized 550 million USDC from the reserve to send to 3 addresses. After that, only $442 million USDC was left, meaning $548 million worth of USDC had disappeared without any account. It also revealed that USDD is backed by assets that are only 50% of its value, as opposed to its previous claim that the stablecoin is backed by a 130% collateral ratio. 

Even today, USDD’s team tweeted that the algorithmic stablecoin’s price stability is maintained through monetary policies adopted by the TronDAO Reserve “based on market conditions.”

“USDD enjoys a guaranteed collateral ratio of at least 130%. The collateral ratio of #USDD is over 200% now,” it added. It also provided a screenshot of TronDAO’s current reserve holdings, which had a market value “close to $1.47 billion.”

At #USDD transparency is key.

Our Collateral Ratio is over 200%, with a total market value of close to $1.47 billion, twice the value of the 725M USDD in circulation. ✅

You can check our collateral assets at all times on https://t.co/j4gKIstpqJ and https://t.co/v9DTFXM7IW 💪🏼 pic.twitter.com/8xDIlI4Sr8

— USDD (@usddio) November 14, 2022

Tron Faces Bleak Future 

Nevertheless, both USDD and Tron’s native token TRX are facing a downward slope in trading markets. TRX slipped 20.8% in the past week, facing an over 5% dip earlier today. This has raised concerns that the Tron ecosystem could meet the fate suffered by the Terra network earlier this year when its governance token Luna and algorithmic stablecoin UST were obliterated from the market.

At the same time, FTX’s downfall is causing huge turmoil in the crypto industry and might continue to do so. If Tron has to sell its Bitcoin holdings as users are speculating, it may drag down the asset’s value even more. Also, findings by Lookonchain raise suspicion about the founder withholding information from users. Therefore, investors worry that the TRON network will follow a downward path leading to another debacle in the industry.

QUICK TAKES:

On November 14, Binance CEO Changpeng Zhao announced that Binance is forming an industry recovery fund

Binance’s recovery fund will assist projects that are “otherwise strong but are experiencing a liquidity crisis,” said CZ

The exchange has introduced the fund in order to reduce the cascading negative effects of FTX. It will also aid in avoiding such catastrophes in the future, the CEO said

Notably, CZ added that more information regarding the same will be available soon

He even asked projects to contact Binance Labs if they think they qualify for the fund

He also said that Binance will welcome other industry players with the means to assist in the fund to join the process. The exec wrote,

Also welcome other industry players with cash who wants to co-invest. Crypto is not going away. We are still here. Let’s rebuild.

A Twitter user named Crypto King pointed out on CZ’s tweet that the recently fallen crypto exchange FTX wouldn’t have qualified for this fund

How would #FTX have even qualified as strong but in a liquidity crisis?

Their “liquidity” was an insolvent token they printed to use for marginalized loans.

— Crypto King (@Cryptoking) November 14, 2022

Interestingly, to this, CZ replied,

Hey, you misread the tweet, I think. Liars or fraud never qualify as strong projects. This is for other projects in the ecosystem.

Nevertheless, Justin Sun the founder of TRON shared CZ’s Tweet and said that his projects TronDAO, Huobi, and Poloniex “echo CZ’s initiative to participate in this industry recovery fund and help good builders and developers to recover from the crisis!”

Crypto Twitter also took keenly to the idea and began suggesting projects that could need Binance’s help, including the near-insolvent BlockFi

@cz_binance CZ, you may want to consider @BlockFi for a recovery fund. They have a decent number of customers in the US, industry leader in financial solutions for Crypto and strong credit card business with 80k customers @BlockFiZac

— TechStockLawyer (@SPACLawyer) November 14, 2022

QUICK TAKE:

Binance discovered API Keys hack on its platform

The user had stored API keys on a 3rd party bot trading platform – Skyrex

The price of AXS was pushed to a low, then spiked, and then came back to a stable level in a single day

A new type of scam is gripping the cryptocurrency industry which makes use of contra trading to steal tokens. Web3 reporter Colin Wu raised the alarm on it earlier today, even though it was first discovered by the FTX crypto exchange last week.

On November 14, the same hack was discovered on the world’s largest crypto exchange Binance. It was noticed that the price of AXS was pushed to a low of $4 USD, then spiked to nearly $20, and then back to a stable level of $7 in a single day.

Furthermore, a Twitter user named CarlosOMFGTv (0%) explained that despite going through many steps of Binance’s security verification and making sure no one had access to the account, his account was still hacked. He wrote,

Anyone wondering why #AXS is pumping. Someone, somehow bought a million dollars worth on my @cz_binance @binance account. I have multiple security levels, nobody accessed my account…

WTF!?

I just got REKT. pic.twitter.com/iGOocFZynU

— CarlosOMFGTv (0%) (@CarlosOMFG) November 13, 2022

It is worth noting that Binance quickly responded to the user’s post asking for assistance and clarifying the incident. CEO of Binance Changpeng Zhao also responded to his tweet and wrote,

Did you share your API key with Skyrex or 3commas, or some other 3rd party platform? If you did, remove those immediately. Our CS agent have spoken with you, right?

Binance CEO on API Keys Hack

Furthermore, on the morning of November 14, Binance CEO CZ stated that a third-party API caused the incident. He even advised users to ‘delete’ API keys from 3rd party platforms like Skyrex and 3commas. For the same, he tweeted,

We seen at least 3 cases of users who shared their API key with 3rd party platforms (Skyrex and 3commas), and seen unexpected trading on their accounts. If you used such a platform before, I highly recommend you to delete your API keys just to be safe. 🙏

Moreover, he even shared CarlosOMFGTv (0%) tweet and wrote,

Carlos confirmed the unrecognized orders were due to his API key leakage. He only has one active API key and it was used on Skyrex, a crypto trading bot platform. We will try to disable all API keys that was used by Skyrex, figuring out how to identify them now. https://t.co/cOANWOyAou

— CZ 🔶 Binance (@cz_binance) November 14, 2022

Notably, as per Wu, a Twitter user ‘CoinmanLabs’ discovered yesterday that there might be other cases where contra trading was used to steal coins on Binance, including AXS CVX and TVK. A tweet by Wu wrote,

Review of the whole process：3Commas API KEY ‘leak’, FTX user funds was stolen by contra trade. While focused on FTX, it also happened subsequently on Binance Coinbase.

Nonetheless, this incident appears to exacerbate the cryptocurrency industry’s “dilemma.” After the collapse of the FTX empire, many people’s confidence was already shaken. Moreover, FTX users had also suffered a very similar scam on 3commas earlier this month.

Rebase Tokens or are cryptocurrencies that maintain their value by increasing or decreasing the total supply of coins in the market. Rebase tokens address the key limiting factors of both US Dollars and Bitcoin. They have stablecoin like properties and maintain their value over time. However, there are also concerns regarding their safety and reliability. We will also gauge if they have future value.

What are Rebase Tokens?

Rebase Tokens are those cryptocurrencies that control their supply to maintain a fixed monetary value over time. They are very similar to stablecoins but do not use any backing. They are a unique kind of tokens because their value is totally controlled by the economics of demand and supply. If the token price falls in value, then a proportionate amount of tokens are removed from the total supply, which then leads to recovery in price. Similarly, when the price increases, more tokens are supplied in the market to keep the prices at a constant level.

How do they work?

How does it work?

Rebase Tokens work on the principle of Rebase Mechanism. Their value is completely dependent on the laws of demand and supply. Price rise is caused by Greater demand which is controlled by additional token supply. Similarly, falling prices are controlled by removing supply from the market. The Rebase Mechanism works through Rebase Protocol. After every period(say 24 hours) supply is increased or decreased(re-based) depending on the change in price.

They control the supply through built-in smart contract coding. Users automatically end up with more tokens if the price is rising and your tokens decrease in supply if the prices are falling. The supply here is controlled by code but work on the same law of demand and supply.

Top 5 Rebase Tokens based on the market cap are Olympus($271.6M) and Temple DAO($62.2M), Snowbank($35.3), Ampleforth($34.9M), and Klima DAO  as of Nov 12, 2022. Here is a complete list of Rebase Tokens from Coin gecko.

How are they taxed?

The income in these tokens is mostly through selling tokens which you got from increased supply. However, if you wish to transfer your gains from other cryptocurrencies to Rebase Tokens, you will incur a tax liability even if you have not sold them for cash.

Rebase tokens are taxed similar to other cryptocurrencies. In the USA and UK, they are taxed in accordance to the Capital Gain rules. In India, there is a 30% Income Tax on gains made from Virtual Digital Assets.

Are Stablecoins like USDC and USDT also Rebase Tokens?

No, unlike Rebase Tokens, stablecoins like USDT and USDC have proof of reserves. They back each and every issued stablecoin with a peg like the US Dollar. Sometimes Dollar-equivalents like US Treasury Bonds which can be always redeemed for US Dollars are also used. Each stablecoin from major players like USDC, USDT and BUSD are backed by such reserves.

But, both stablecoins and rebase tokens have the same target, to keep the token price stable.

Do they have a Future?

Yes, Rebase Tokens have immense potential to address the shortcomings of both fiat currencies such as US Dollar and major cryptocurrencies like Bitcoin.

On the fiat front, they can help central banks control monetary policy and directly inject cash into the economy. The current mechanism of Repo and Liquidity Windows often take several months to show difference. It is also upon banks’ will whether they wish increase or decrease their lending rates. Often they need to be forced by the Central Banks.

On the cryptocurrency front, they can help issuers better control their coins and tokens to protect them from volatility which is a major issue in almost all cryptocurrencies.

Presently, it seems that Rebase Tokens are ahead of their time. Such technology could have immense effect on the economies of the future. Upcoming CBDCs might also be a kind of Rebase Tokens in their own right. However, currently they are still in an infant stage.

QUICK TAKE:

Half of Galois Capital’s assets are trapped on the defunct cryptocurrency exchange FTX

The amount is estimated to be around $100 million

Kevin Zhou wrote in a letter to Galois investors that it could take “a few years” for the company to recover “some percentage” of its funds

Crypto hedge fund Galois Capital is the latest company to be caught off guard by the FTX fallout. It is worth noting that nearly half of its assets were trapped on the now-defunct cryptocurrency exchange. Further, as per a news journal, the amount is estimated to be around $100 million. Notably, the hedge fund founder was credited with predicting the collapse of the cryptocurrency network Terra and its tokens UST and Luna this year.

Furthermore, in a letter, Galois co-founder Kevin Zhou told investors that while the hedge fund had been able to pull some funds from the exchange, it still had “roughly half of our capital stuck on FTX.” As per the news journal Zhou wrote,

I am deeply sorry that we find ourselves in this current situation. We will work tirelessly to maximise our chances of recovering stuck capital by any means. It could take “a few years” to recover “some percentage” of its assets.

Nonetheless, as per another news journal, Zhou said that the funds invested in FTX totaled around $40 million. Further, depending on the outcome of the bankruptcy proceedings, it may take some time for Galois or any other FTX investors to recover any of their funds. Zhou wrote in a letter to Galois investors that it could take “a few years” for the company to recover “some percentage” of its funds.

He further told the investors,

We will work tirelessly to maximize our chances of recovering stuck capital by any means.

Defunct FTX Traps Funds

Galois is one of the industry’s largest crypto-focused quant funds. It has more than $200 million in assets as of this summer. Its primary trading activity is as a market maker, which allows it to profit from the trades of other investors. Further, as per industry insiders, the fact that FTX was used by so many hedge funds and was regarded as one of the world’s safer crypto trading venues means that many managers may have money trapped on the exchange.

Already, the FTX contagion has spread throughout the cryptocurrency industries, and several companies face cascading losses. This includes Sequoia Capital and SoftBank, both of whom this week decided to write off multi-million dollar investments in the exchange. Furthermore, after a previously promised cash injection from FTX couldn’t materialize, crypto lender BlockFi halted customer withdrawals.

Other companies that have funds stuck on the exchange include CoinShares. It has proprietary assets worth up to $31 million deposited on FTX.

The companies may have to wait for a long time for their funds to be returned back. After failing in a last-ditch effort to secure a rescue package, FTX CEO Sam Bankman-Fried resigned on November 11. It came after a turbulent week in which the exchange admitted to having a shortfall of funds. Further, it raised concerns that clients could suffer significant losses. Moreover, FTX even filed for chapter 11 bankruptcy protection on November 11.

QUICK TAKE:

Zane Tackett, former head of Institutional sales at FTX shared details from FTX’s balance sheet

As per the information shared by Tackett, the liabilities of FTX are $8.8 billion

This is against liquid holdings of $900 million and nearly $5.2 billion in other assets

On November 11 Zane Tackett, former head of Institutional sales at FTX, shared details from the crypto exchange’s balance sheet.

As per him, the liabilities of FTX are $8.8 billion. At the same time, it held liquid assets worth $900 million, which includes USD, JPY, and DAI. The less liquid assets were worth $2.037 billion, which included GBTC, ETHE, and SOL. The company’s Illiquid assets were worth $3.2 billion, including long-term equity investments.

This was against a liquid hole of $7.9 billion and an illiquid hole of $2.66 billion. Although, Tackett did clarify that these are estimated figures that he viewed on the exchange’s balance sheet.

He further wrote,

There’s no way to paint a pretty image out of these numbers, but when I saw the balance sheet this evening i thought it was going to be much worse. Now, granted, there’s a massive hole in liquid assets, there is a pretty big chunk of change in the ventures portfolio.

Moreover, the former employee asked users’ opinions on two options that FTX could take going forward. For option one, he suggested bankruptcy proceedings and going the legal way. Although he added that the hack and eventual demise of Mt Gox saw users losing millions of dollars in Bitcoin. However, eight years on, users have yet to see a penny from it. He added that “lawyers, accountants, and tons of others all take their cut from the creditors throughout this slow, long, brutal process.”

FTX Clients Wanted Tokenization

Notably, for option two he said that users’ funds could be tokenized and issued to them to be redeemed at a later date. If nothing else, a token will provide the users with immediate liquidity on their remaining assets which alone makes it superior to option one, he said.

5/ I don't know what the token model for something like this would look like as instead of merely representing debt, there's the added aspect of existing but illiquid assets that would need to be taken into consideration. Luckily i know a guy who has some expertise @PhilGPotter

— Zane Tackett (@tackettzane) November 11, 2022

Furthermore, as per Tackett, a number of FTX large clients that he spoke with in the past few days voiced their interest in exploring a token model to address the shortfall. Further, he said that these clients stated that it would be heavily favored over any bankruptcy procedures.

Nonetheless, crypto Twitter appeared divided over the two routes that FTX could take. Nevertheless, tokenization appeared to be the favored choice for users, as it would eliminate a legal battle. For instance, a Twitter user named Arthur said,

B is the clear option. Bankruptcy only ends up benefiting lawyers, accountants etc and victims will see very little at end of process after a long and torturing process.

Bankruptcy procedure is probably the worst option for people with funds on FTX.Takes forever, has a shitton of middlemen and people who'll try to have a cut of it, will fully doxx everyone, etc.

Any other option is probably better.

— Tree of Alpha (@Tree_of_Alpha) November 11, 2022

Although, it appears that the users’ preference was not considered as FTX filed for bankruptcy at the time of writing. FTX, FTX.us, Alameda, and 130 other companies affiliated with the FTX Group filed for Chapter 11 bankruptcy in the US today after a week of chaos and uncertainty.

QUICK TAKES: 

In a somewhat expected turn of events, troubled crypto exchange FTX.com and its American arm FTX.US have filed for bankruptcy. This also includes the sister company, market-marker Alameda Research, along with 130 additional affiliated companies, which together made up the “FTX Group”

The Chapter 11 bankruptcy filing came within less than a week from when the FTX insolvency saga first began unfolding. The bankruptcy proceeding will take place in the United States, in the district of Delaware

Per a statement issued by the company, FTX Group’s founder and CEO Sam Bankman-Fried has also resigned. In his place, John J. Ray has been appointed as the CEO, who will look over the transition. Many employees working under the FTX Group may also be able to retain their positions for the time being

The company has reportedly filed for bankruptcy to “review and monetize assets for the benefit of global stakeholders.” Regarding the same, Ray said,

The FTX Group has valuable assets that can only be effectively administered in an organized, joint process.

Although, LedgerX, FTX Digital Markets Ltd., FTX Australia, and FTX Express Pay are not part of these proceedings

SBF had yesterday revealed that the company requires a large cash injection or it would need to file for bankruptcy. This came after a $9.4 billion hole was found in its balance sheet which forced the exchange to halt withdrawals. Although, it is expected that this gap could grow further in the coming days, as more information is revealed

Moreover, as per insider information, the company only has about $900 million in liquid assets

FTX Contagion Spreads

FTX was earlier going to be acquired by Binance, which later backed out after conducting due diligence. Tron founder Justin Sun had also made a similar offer but has presumably backed out as well.

FTX is nevertheless facing legal investigations in nearly seven countries, including the USA

Users had been hoping against bankruptcy, as it could lead to their funds being frozen for an extended period. Billions of dollars in users’ cryptocurrencies are stuck on the exchange, which briefly opened withdrawals for Bahamas KYC holders today.

It is speculated that this was done to give a way out to employees and preferred investors before the inevitable bankruptcy filing

Nevertheless, after a brief rally earlier today, cryptocurrency markets once again plunged on this update. At press time, Bitcoin and Ether had dropped 3.4% and 4.5% in the past hour, respectively

Solana had dipped 10.5% during the same time, after seeing a 28% hike earlier today

The biggest loser, however, is FTX’s native token FTT, which tanked 20.9% in the past hour. After seeing a drop of nearly 85% in the past week, it appreciated almost 30% today. However, recovery for FTT seems unlikely now as users rush to dump the worthless token

QUICK TAKES: 

Japanese investment management firm Softbank might be the latest to emerge as a casualty from crypto exchange FTX’s fallout. The tech-focused firm reportedly had a nearly $100 million investment in the company

Softbank may decide to write off its whole investment in FTX as the exchange inches toward insolvency. FTX Founder Sam Bankman Fried this week said that without a cash influx soon, the exchange may have to file for bankruptcy

Softbank is expected to write off the investment in the December quarter, an anonymous source told Bloomberg

The investment had already been market close to cost and hadn’t recorded a boost in valuation or profits

Softbank had earlier participated in two funding rounds for FTX. This included a $900 million series B funding round last year and another $400 million this year

However, the company hasn’t yet disclosed the total value of its investment or how its stake has been performing

Sequoia Capital, one of FTX’s largest investors, had already revealed that its exposure to the exchange was limited. Earlier this week, it too noted that it had written off half of this investment, which was estimated at $200 million, in light of the recent chaos

FTX’s other largest backers include Singapore-government-owned investment firm Temasek at $205 million. It also includes Paradigm at $215 million and the Ontario Teachers’ Pension Plan at $80 million

QUICK TAKE:

Tether(USDT) price slightly depegged earlier today

Alameda is said to be shorting USDT by supplying USDC on AAVE and borrowing USDT

TRON DAO Reserve announced that it would purchase 300 million USDT on the open market

Since the FTX exchange and Alameda issues surfaced, the crypto markets have suffered a cascade of negative consequences. Bitcoin and all of the popular altcoins reached new yearly lows, causing panic in the market.

However, today the spotlight was on the top stablecoin Tether(USDT) depegging in the midst of a massive bearish wave in the market. In the meantime, market participants started panicking. At the time of press, as per CMC Tether was trading at $0.996. It was down 0.29% in the last 24 hours. Notably, it fell to a maximum of 3% from its $1 peg earlier today.

Yo #Tether, what's the matter? #USDT

When Terra collapsed, we had a similar price action.

People are de-risking and they are dumping USDT for USDC / BUSD just in case.

This is a normal price movement considering market pressures as long as Tether can pay up. pic.twitter.com/nyKJ62OTjT

— Duo Nine | discord.gg/ycc (@DU09BTC) November 10, 2022

Soon afterward, Tether froze $46 million in USDT belonging to the FTX exchange and held on the Tron blockchain. Reportedly, this was at the behest of Law Enforcement agencies, who are conducting an investigation against FTX.

This came after TRON DAO Reserve, a decentralized cryptocurrency reserve, announced that it would purchase 300 million USDT on the open market. It had earlier said that will purchase USDT worth $1 billion. The goal, it said in a tweet, was to “safeguard the overall blockchain industry and crypto market,” without going into further detail.

Notably, Tron founder Justin Sun had earlier today revealed that he was looking into acquiring FTX. At the same time, he also enabled trading for TRX, Tron’s native token, on FTX.

Alameda shorting USDT

Notably, Alameda is said to be shorting USDT by supplying USDC on AAVE and borrowing USDT. Further, on Curve, the platform swapped USDT to USDC, and the transaction is recorded on Etherscan. Further, a wallet associated with Alameda Research borrowed 250,000 USDT on Aave this morning, which it transferred to Curve. Traders speculate that the firm is shorting the asset, but it is unclear what its overall trading position is based solely on on-chain data.

so alameda is trying to short $usdt?

>supply USDC on aave>borrow USDT on aave>swap USDT to USDC on curve

dafuq man…https://t.co/F3tQvDMfF8

— astromagic (Trust_No_One) (@astro__magic) November 10, 2022

Furthermore, Curve’s stablecoin pool is becoming out of balance at the same time. The pool has a large USDT component (82%), which reduces the liquidity for other stablecoins. The reason for this would have been traders exchanging USDT for other stablecoins.

Although, Tether CTO Paolo Ardoino urged patience in response to the day’s USDT moves. He wrote,

#tether processed ~700M redemptions in last 24h. No issues. We keep going.

Interestingly, Ardoino’s Tweet echoed Tether’s official stance, which had already been published the day before. The USDT issuer stated that it had no direct exposure to FTX or Alameda. Tether wrote,

Tether is completely unexposed to Alameda Research or FTX. Tether tokens are 100% backed by our reserves, and the assets that are backing the reserves exceed the liabilities.