On Wednesday (9 November 2022), Arthur Hayes, Co-Founder and former CEO of BitMEX, shared his thoughts on troubled crypto exchange FTX and how its potential bankruptcy could affect the crypto market.
This Twitter thread by Jonathan Wu, who works at Aztec Network, nicely summarizes how FTX and sister company Alameda Research got to the state they are in at the moment:
FTX was the world's 3rd largest crypto exchange.— jonwu.eth (@jonwu_) November 8, 2022
Today it's said to be insolvent and in the midst of an acquisition by Binance.
Here's everything you need to know about Alameda Research and the collapse of FTX:
On Wednesday (9 November 2022), Hayes told his over 323K Twitter followers:
“If CZ, the richest person in crypto, can’t do the deal. No one can do the deal. FTX customer deposits will only see recovery in a bankruptcy court, and that will take many years to sort out. Mt Gox creditors still haven’t received funds and it’s been almost a decade. Not your keys, not your coins. Expect all exchanges to guard their clients capital closely. No more taking credit from so called crypto prime brokers. No more polite phone calls to large traders to request a margin top up. No mercy liquidation…
“Money managers that lost funds on FTX will retreat from trading initially and reduce the number of trading venues on which they operate. Orderbook liquidity will fall. It won’t take much to push the market to much lower levels and force other over-leveraged players into distress. Remember a lot of liquidity providers will sit on the sidelines licking their wounds for a bit…
“Assume that until proven otherwise all counterparties have or had exposure to one of SBF’s enterprises. That means if you don’t believe they are being honest about their losses due to word salad statements that don’t actually say much. GTFO! I have been trading crypto for longer than I have been trading TradFi, and I am still speechless about what is going down.
“The faster we take our losses, the faster we bottom and set ourselves up for the Fed pivot which will happen sometime in 2023. The worst would be for zombies to still be amongst us when YCC begins in earnest. SFYL but chin up, the band is still playing, and there is money to be made in both directions.“
The next day, the FTX CEO apologized for his mistakes:
1) I'm sorry. That's the biggest thing.— SBF (@SBF_FTX) November 10, 2022
I fucked up, and should have done better.
Kraken Co-Founder and CEO Powell took to Twitter yesterday to share his thoughts on the potential collapse of FTX, which has been accused of playing with customer funds:
1/ This industry is made up of so many smart, passionate, open-minded, welcoming people, with genuine humanitarian interest at heart.— Jesse Powell (@jespow) November 10, 2022
I know we're going to get past this. True believers will not be deterred. But, this is a massive setback. I'm really trying to control my rage.
He went on to say:
“Our good, trusting nature makes us easy targets for con artists. Some even tell us straight up that they’re here for profits, not crypto, and we praise them for their honesty. Yet we’re surprised when they turn out to be who they said they are. We need to raise our standards… This isn’t about aiming high and missing. This is about recklessness, greed, self-interest, hubris, sociopathic behavior that causes a person to risk all the hard-won progress this industry has earned over a decade, for their own personal gain. While already being rich AF…
“We let clowns ride under our banner while they sell us out for their own interests. We give them power to speak for us but they haven’t earned that privilege. When they blow themselves up, it’s our house, our reputation, our people which bear the brunt of the damage… The damage here is huge. An exchange implosion of this magnitude is a gift to bitcoin haters all over the world. It’s the excuse they were waiting for to justify whatever attack they’ve been keeping in their back pocket. We’re going to be working to undo this for years…
“Thankfully, Kraken wasn’t exposed to any of the resent disasters. While we aim to give our clients access to bleeding-edge crypto products, we take a very conservative approach to our business operations, security and financial resiliency. Survival & mission above profit… I pray for everyone who got caught up in this mess. I hope it doesn’t turn you off of crypto. I hope you take care of yourself and continue to be a part of this community. These are growing pains. Money can be made again…“
CoinDesk says that according to a report by Reuters, the FTX CEO “has had discussions with several investors including Tron founder Justin Sun, rival crypto exchange OKX and a number of investment funds as he looks to raise $9.4 billion for FTX.”