Market Still Reeling From Collapse of FTX
Yesterday I noted Crypto Crash Is Led by a Whopping 88 Percent Plunge in FTX
Here is the chart I posted yesterday. Today’s chart will follow.
Valuation Plunge
The 44 percent rally was due to the announcement of a deal with Binance. It was all over in a matter of about 4 hours, rally to bottom.
FTX was valued at $32 billion in a funding round in January. At $5.52 it’s market cap is now $732 million.
The WSJ commented “FTX is the brainchild of Sam Bankman-Fried, the millennial billionaire hailed as a savior of the crypto industry this summer.“
FTX 2022-11-09
CoinDesk Comments
Bitcoin (BTC) dropped to a new 23-month low, as CoinDesk reports cryptocurrency exchange giant Binance is highly unlikely to go through with its proposed acquisition of struggling rival FTX after less than a day of reviewing the company, according to a person familiar with the matter. “The Hash” team discusses the latest developments and what it could mean for seven-time Super Bowl champion Tom Brady, who quickly became a prominent FTX backer.
The FTX Token price is $4.00, a change of -76.78% over the past 24 hours as of 11:19 a.m. The recent price action in FTX Token left the tokens market capitalization at $1,316,621,461.63. So far this year, FTX Token has a change of -90.12%. FTX Token is classified as a Currency under CoinDesks Digital Asset Classification Standard (DACS).
The above snips courtesy of CoinDesk About FTX Token.
Celebrity football champion Tom Brady helped propel FTX. That holding is now wiped out.
Q: What did Brady understand about FTX?
A: Nothing
FTX hit an all-time high of $85 on Sept. 9, 2021 but may soon be worthless. It is the biggest plunge ever in market cap.
One Answer In via Bloomberg
That leaves SBF’s net worth at about $1 billion, down from $15.6 billion heading into Tuesday. The 94% loss is the biggest one-day collapse ever among billionaires tracked by Bloomberg.https://t.co/f2lZ1SyGQL
— Mike “Mish” Shedlock (@MishGEA) November 8, 2022
That leaves Sam Bankman-Fried’s net worth at about $1 billion, down from $15.6 billion heading into Tuesday. The 94% loss is the biggest one-day collapse ever among billionaires tracked by Bloomberg.
Amazing.
The fallout over FTX spilled over for a second day into everything but stablecoins.
Bitcoin Bottom Not In
Massive Withdrawals
Coindesk reports Crypto Markets Tumble as FTX Reportedly Hit With $6B in Withdrawals
Fears over FTX’s solvency led to massive withdrawals from the cryptocurrency exchange, an offer from rival Binance to purchase the company, and ripple effects throughout the crypto markets.
Bitcoin Returns
Ethereum, the second largest crypto by market cap also took huge hits in the FTX fallout.
Ethereum
Unlike Bitcoin, Ethereum did not make a new 52-week low in the FTX fallout.
However, it was still hammered very hard. It’s down 22 percent in the last 24 hours.
Ethereum Returns
Ethereum vs Bitcoin
Bitcoin operates on a “proof of work” basis. Ethereum made a switch from “proof of work” to “proof of stake” basis.
If you are interested in the difference please see Proof of Work vs. Proof of Stake: Why the Difference Matters for Ethereum Investors
Proof of work requires computers to solve cryptographic puzzles, putting in “work” to be rewarded the ability to verify, or validate, transactions on the blockchain. It’s called cryptocurrency mining, and it’s similar to a competition.
With proof of stake, a validator is chosen randomly, based in part on how many coins they have locked up in the blockchain network, also known as staking. The coins act as collateral and when a participant, or node, is chosen to validate a transaction, they receive a reward.
Proof of stake requires multiple validators to agree that a transaction is accurate, and once enough nodes verify the transaction, it goes through.
“Proof of stake is much more energy efficient,” Blumberg says. “There’s not enough energy in the whole world to power a decentralized finance ecosystem on the scale that ethereum and other blockchains want.”
It is Bitcoin’s proof or work structure that makes Bitcoin extremely expensive to mine.
Energy consumption is much higher with proof of work than with proof of stake. The bitcoin network alone, for example, uses as much power as an entire country like Malaysia or Sweden, according to data from the Cambridge Center for Alternative Finance.
Which Model Will Succeed?
It is unclear which, if either, of these models will succeed and if so at what price.
Ethereum is certainly more energy efficient but that does not imply any price performance. There’s no reason price cannot fall to $200 or whatever.
Bitcoin’s goal is to replace fiat currencies. Bitcoin has failed in that mission and will never succeed in my estimation.
It is has been wildly successful as a speculative plaything despite a 73 percent decline over the past year.
In the past year Bitcoin has mostly traded in sync with the biggest technology flops.
ARKK Weekly Chart
There was no fundamental basis for Kathy Wood’s ARKK funds and there still isn’t.
Where to From Here?
Where to from here is anyone’s guess. But recall the million dollar Bitcoin predictions based on hash rate projections. Those predictions now seem laughable.
Up until a year ago, Bitcoin’s entire life was in a declining interest rate, massive central bank liquidity push environment.
That environment has changed.
Both the Bitcoin speculative high and ARKK speculative high came in a Fed QE liquidity surge. That tide is going out.
This post originated at MishTalk.Com
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Second, Musk gets so hard up for cash that he has to take Starlink public before he wants to. Kids, take it from a retired telecom analyst: Assuming ongoing fundamental execution, Starlink will be the biggest, richest, most outrageously successful company and stock that anyone now alive has ever seen, by a factor. It would be fantastic if Musk, the idiot who paid way too much for TWTR and stupidly didn’t pay the $1 billion withdrawal fee, has to sell Starlink shares cheap. If that happens, it will be the buy of a lifetime.
Same day (July 5) that I bought the MSTR puts, I bought SPY puts. Same deal: SPY rallied. Those don’t expire until next July 16. I have time on those too. I’m just as bearish on the S&P 500 as I was in July, maybe more so. We shall see.
the Fed balance sheet”, O/N RRPs are contractionary.
That, of course, is an accounting error according to the Federal
Reserve Bank of Chicago’s “Modern Money Mechanics”. “If the buyer of a reverse
repo or a security sold by the Fed is a nonbank (which 90% of RRPs are), and
pays for the purchase using its bank account, the money supply is directly
affected”.
“Inflation is impossible!” he shouted. “You’re an idiot.”
Only later, after I had made some money and gotten out when TSLA was somewhere in the $900s pre-split (I had $680 calls), I saw that his brilliant theory emanated from Cathie Wood. So I was able to laugh AND go out to dinner. LOL