The collapse of FTX
Notes
ref: hammock
This is my view as to what possibly happened in last 24 hours. Mind you I have no idea if its real but i am making an educated guess based on my 10+ yrs seeing such events play out several times. 1) Alameda used FTX money and balance sheet along with using $FTT to take out billions of loans and "investments" including possibly customer funds to "invest" "efficiently" into risky investments
2) He then also used a lot of it to prop the entire market up in the 1250-1350 range over months to decouple the market possibly and keep $FTT above the $22 mark which was possibly a margin level for his collateral.
3) Market rallied and everything was fine. He is up a lot but lost few between making potentially risky investments (maybe shorting?), maybe options market making as that was his original expertise... who knows. But he clearly lost some money in there.
4) Rumors spread of balance sheet shortfall. Now mind you. Alameda is a separate entity than FTX. So using FTX resources for trading on Alameda is a big no no.
5) CZ finds out about this. Decides to market sell his billions of $FTT position. Caroline gives up her hands and says they will buy at $22 which on the chart you can see has been the support line time and time again so clearly that line has been supported constantly..
6) The market selling pushes price below 22. Entire market and large players smell blood.. the moment the price goes below $22 the lenders market sell coins (FTT and $SOL) for margin. This results in a loop after it breaks below $22 and goes into freefall with no support anymore
7) With no options to get more money from lenders and having no other assets to get more loans from lenders as they are already selling his assets, SBF goes to CZ and asks to bail out FTX as there is a big hole that cannot be filled anymore. CZ probably decided to take over FTX and said to SBF you have to either stop gap some of the fills from selling your assets since you did things wit the balance sheet and customer money you weren't supposed to. He probably said he will bail out FTX but NOT Alameda. Sam then either market sold everything he had... OR the lenders... Sam went to the lenders and said I am defaulting on my loans... So the lenders just market sold all the collateral. I think its most likely Sam said he is going to default on the loans and they market sold.
IF the lenders recouped 70-80% then i think its fine.
IF the lenders WERE NOT able to recoup and will have to take a write off on the loans.. we have issues. That part I am unsure about. IF a large lender goes under... then there is further contagion. The market selling off coins so quickly triggered probably more liquidations.
WHERE DO WE GO FROM HERE? We have seen bigger black swan events like in crypto past. All new concepts have days weeks like this. Stocks had it, banks had it and crypto has had it few times. There will always be new smart people to push growth and take over.
When 3AC went bust, we got to $800 on $ETH. We rebounded to 2k in time. That was close to 17-18bn. This is smaller. in time... we will be back. Not sure when. but eventually it all comes back. Market is cyclical end of the day.
ref: thediff
FTX isn't a normal exchange—it's a crypto exchange, and like most crypto exchanges, it has elements of an exchange, a clearinghouse, and a prime brokerage, all rolled into one. But unlike other crypto exchanges, it has yet another feature, an associated trading firm, Alameda Research.
there's FTT: it's a token issued by FTX, which gives holders interest if they stake it, access to crypto airdrops, and a discount on commissions of up to 60%. FTX has a clever system where some of their commissions are used to buy and burn FTT, which makes it an equity-like: you could buy FTT because you expect a "dividend" from saving on commissions, or because you expect to profit from the "buyback" of automatic repurchases.