Oops, it did it again. Crypto, that is. It appears to have shot itself in the other foot and it’s all because of two warring exchange bosses known by their initials, an immense amount of FUD, a bank run on FTX, and its impending takeover by larger exchange Binance.

We recall referring you to the Stealers Wheel classic Stuck in the Middle With You during the whole Terra LUNA/3AC/Celsius/crypto contagion fiasco. And here we are again, trying to make some sense of it all, but we can see it makes no sense at all.

And the worst of it has all happened in the wake of a rare blood moon lunar eclipse, too.

What’s happened is yet another stupendously bad look for the crypto industry, disgusting for crypto portfolios everywhere, and even more disastrous for FTX boss Sam Bankman-Fried, whose net worth has reportedly plummeted from a whopping US$16 billion to US$991 million in less than a day. (According to an estimate from the Bloomberg billionaires index.)

 

Here’s what else we know so far. Unpalatable news in digestible bullet point form…

• FTX exchange CEO Sam Bankman-Fried (Aka SBF) had been under fire for weeks after making remarks about crypto regulation, which were considered to be unpopular with the decentralisation-loving crypto community.

• Sentiment regarding SBF and FTX only grew worse after the balance sheet for his trading and venture firm Alameda Research was leaked by CoinDesk, showing an alarming borrower-collateral tie to the exchange’s FTT token. A token that’s proven to be highly illiquid.

• After this leak, Binance CEO Chanpeng Zhao (aka CZ) made his move, making the decision to exit Binance’s entire position in the FTT token public on Twitter. To begin with, CZ announced that Binance was selling more than US$584 million in FTT holdings, and said that the full liquidation would take place over a few months to “minimise market impact”.

• He also said this:

… which referenced SBF’s alleged behind-the-scenes lobbying against Binance and helped send Crypto Twitter into a panic.

• It’s been a particularly “alpha” play from CZ, who once helped incubate the FTX exchange in its early days, but who has since fallen out with exchange rival SBF.

• The FTT token subsequently plummeted, with the very real risk that Binance’s FTT sale could spiral both Alameda and FTX into insolvency given the amount tied to FTT as a means of collateral.

• Which brings us to today…

• A day after tweeting that the FTX exchange was essentially “fine”, SBF dropped the bombshell announcement that the exchange’s non-US assets would be sold to Binance.

• CZ has confirmed the deal, and the crypto market initially rallied on the news, but has subsequently tanked as further fears of the “liquidity crunch” sunk in, and withdrawals from the FTX exchange appeared to be effectively paused, according to The Block and other crypto-media sources.

• Bitcoin is currently down 10% and Ethereum -15% over the past 24 hours. Other cryptos, particularly Solana (-20%) – which has funding ties to SBF and FTX – have copped a greater walloping at the time of writing.

• As for FTT? Decimated. It’s down 75%, lying in a pool of its own imploded claret, at US$5.60. A few days ago, it was trading up around US$25. We’ll do an update on price action a bit later in the day.

• Meanwhile, CZ has proffered some lessons from all this for the crypto community:

• And he’s also calling for a “proof of reserves” system of transparency from all crypto exchanges, promising to implement it with Binance.

Stockhead is seeking some industry comment on the whole debacle. Stay tuned.