BTC is currently trading around $17,700 and ETH around $1,250. There are no notable gainers in the last 24 hours. The global crypto market cap is ~$916B, down ~9.5% over the last day. DeFi Total Value Locked is ~$46b and BTC dominance is around 41%.
Equities are down slightly this morning, while crypto is down substantially behind the market-roiling failure of crypto behemoths FTX and Alameda. It may be helpful to review our daily market update on Monday and Tuesday to understand the multi-day series of events, as we’ll build on prior commentary below.
Just after 11:00 am EST yesterday, SBF broke his silence by announcing Binance’s strategic investment in FTX. Binance’s CEO CZ clarified minutes later that “FTX asked for our help” and that “we signed a non-binding LOI [letter-of-intent] to fully acquire FTX and help cover the liquidity crunch” to protect users. The deal’s scope does not include FTX US, which is a distinct entity, and completion of the deal is pending Binance’s due diligence. Crypto markets rallied sharply on the initial announcement, but as rumors swirled around the magnitude of FTX’s loss, markets reversed sharply lower as investor’s feared Binance may back out of the deal given the non-binding terms. While the precise details of FTX’s failure remain unknown at this point, it appears that customer deposits were improperly lent out, and client assets were not fully backed. As concerns over insolvency spiraled, ~$6b of client assets fled the exchange while it appears to have been operating in a fractional reserve nature. It also appears the exchange was leveraging its internally created FTT token as collateral, further exacerbating the situation as the FTT token fell below $5. More coverage will follow as additional details emerge.
On the political front, the strong red wave that most predicted for midterms did not materialize, and Democratic candidates have outperformed expectations so far. Control of the House and Senate is still being determined, and finalized results may not be known for multiple days due to the various state rules and mail-in ballots. Both races currently appear too close to call, but real-time prediction markets forecast a roughly even probability of a red wave and a blue wave, with the most probable outcome now being a red House and a blue Senate. Elsewhere, US CPI will come tomorrow morning.
Notable news includes: Coinbase, Tether, and Circle denied exposure to FTX while Galaxy noted a ~$77m exposure; BlockFi said its products are fully functional in the wake of the FTX events; Binance topped up its insurance fund with an extra $1b of BTC and BNB; a number of crypto exchanges are scrambling to compile proof-of-reserve attestations in the wake of the crash; ETH turned deflationary as on-chain liquidations increased during the chaos; Solend struggled to liquidate a SOL loan due to network congestion on Solana; Russia’s central bank reportedly looks to integrate digital assets into its financial system; the CFTC imposed new sanctions on Tornado Cash; Bored Apes founder Gordon Goner proposed a new model for NFT creator royalties; Adam Neumann’s latest start-up Flowcarbon launched carbon-offsetting NFTs; and, Meta laid off ~11k employees representing ~13% of its headcount.
Matt Kunke, Junior Strategist | Twitter, Telegram, LinkedIn
Brian Rudick, Senior Strategist | Telegram, LinkedIn
This material is provided by GSR (the “Firm”) solely for informational purposes, is intended only for sophisticated, institutional investors and does not constitute an offer or commitment, a solicitation of an offer or commitment, or any advice or recommendation, to enter into or conclude any transaction (whether on the terms shown or otherwise), or to provide investment services in any state or country where such an offer or solicitation or provision would be illegal. The Firm is not and does not act as an advisor or fiduciary in providing this material.
This material is not a research report, and not subject to any of the independence and disclosure standards applicable to research reports prepared pursuant to FINRA or CFTC research rules. This material is not independent of the Firm’s proprietary interests, which may conflict with the interests of any counterparty of the Firm. The Firm trades instruments discussed in this material for its own account, may trade contrary to the views expressed in this material, and may have positions in other related instruments.
Information contained herein is based on sources considered to be reliable, but is not guaranteed to be accurate or complete. Any opinions or estimates expressed herein reflect a judgment made by the author(s) as of the date of publication, and are subject to change without notice. Trading and investing in digital assets involves significant risks including price volatility and illiquidity and may not be suitable for all investors. The Firm is not liable whatsoever for any direct or consequential loss arising from the use of this material. Copyright of this material belongs to GSR. Neither this material nor any copy thereof may be taken, reproduced or redistributed, directly or indirectly, without prior written permission of GSR.