2022-11-10 03:03:45
Our thoughts on the FTX collapse …
These are undoubtedly some of the toughest times in the market as one of the largest exchanges seem to be insolvent, halting customer withdrawals; spreading wide-range panic/contagion.
The important question to ask? Will CZ / Binance actually acquire FTX and/or if it's even feasible or legal for them to do so?
1. Financially feasible?
We believe that CZ / Binance will soon discover that there is a lot of bad debt/hole on the FTX books after doing their DD, rendering it extremely unattractive from an acquisition perspective.
2. Legal?
Some question if something like this would even be legal as it would likely trigger some anti-trust laws. This is a fair point given Binance could easily be classified as a monopoly in the scenario where they acquire their direct competitors (2nd ranked exchange)
3. Will users be made whole?
To our understanding, FTX.US withdrawals haven’t been halted so there shouldn’t be any issues there in particular, however, that makes up a small fraction of their total user base.
Most are using FTX.com which seems to have withdrawals still halted. In the case where CZ doesn’t acquire FTX, it would likely result in a lengthy chapter 11 bankruptcy process(similar to Celcius and Voyager); likely resulting in users receiving way less than they were compromised for.
Our thoughts? Going forward, we can still recommend using Binance as far as CEXs go (as we’ve always have) , however, the argument for self-custody has never been stronger after the recent events; for those familiar with self-custody, it would probably be best to opt for cold storage(ledger) for the majority of your stack while leaving an amount only for trading on exchanges until this fud resolves itself.
As per tokens most affected by this contagion, we can expect large Alameda / FTX holdings such as (FTT),SOL , SRM , RAY and other/most SOL ecosystem tokens to be liquidated to help cover customer deposits; stay away from these.
To conclude, it seems unlikely that Binance will acquire FTX under the current assumptions/conditions; however, if it turns out that they don’t have much bad debt/hole, that can quickly change the risk profile.
3.1K viewsGang Plank, 00:03
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