Weekly Wrap - 19th of November

$40 billion to zero

Up until a month ago ex-CEO of FTX, Sam Bankman-Fried (SBF), claimed the now bankrupt company had $40 billion of equity value. The collapse started after revelations emerged that their sister company, Alameda Research, had major issues in their balance sheet. 

Much of the company’s assets were semi-liquid assets, stored in the form of cryptocurrency tokens, a large portion being FTX’s native token FTT. There was an incestuous relationship between these two companies. FTX allegedly loaned Alameda as much as $10 billion worth of customer funds and there were also instances of Alameda loaning FTX large sums. Allegedly SBF received a $1 billion loan from Alameda.In bankruptcy filings on thursday, John J. Ray III, FTX’s new CEO, said, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

In a series of tweets, SBF goes into detail trying to clear his name and provide customers with hope of reparations. This collapse has sent cryptocurrency markets spiraling and has raised concerns about regulations.

Is crypto dead?

The Economist thinks so. In an article released by the publication titled, “Is this the end of Crypto?”, they reference Bitcoin’s fall from $69,000 to $16,000 over the past 12 months. Citing the FTX debacle as another contributing factor, the report speculates that cryptocurrencies have reached the end of their life and we may see more bloodshed

A black swan event coupled with a bear market are two major contributing factors to Bitcoin’s 75% decline over the past year. This is definitely something to consider, as well as the state of the traditional financial markets around the world. As rumors of a recession stew, investors are sitting on their cash waiting for markets to bottom out and sentiment to improve.

It’s not all about the money though!

Although many are feeling the hurt of FTX’s collapse and continuous declines in asset value, some are focused on the regulations that may be impacting these issues. The issues surrounding regulation this week often make reference to FTX and how the centralized exchange, despite all the talks with regulators, was still able to operate so questionably.

It’s led many speculators and investors to shift their attention to decentralized exchanges like dYdX. The exchange’s native token DYDX has seen a massive rise of over 100% since the news of FTX’s insolvency broke.

Does there need to be a middle-ground? Can you allow completely decentralized organizations to operate how they please without any government intervention? Edward Snowden, who exposed an unlawful mass surveillance program by the NSA nearly 10 years ago, thinks so.

Earlier this year the U.S. government outlawed the Ethereum mixing tool Tornado Cash. Speaking remotely at Camp Decrypt in Napa Valley on October 27, Snowden said there are issues people in the crypto community "largely aren't taking seriously enough,” and that this is a “do or die moment”. He went on to say Tornado Cash is "simply a tool, it does nothing without human provocation" and compared it to a water fountain in a public park.