“4) FTX International currently has a total market value of assets/collateral higher than client deposits (moves with prices!).”—I think this is in line with the mainstream narrative of the assets (e.g. FTT) being almost completely illiquid—i.e. no way they can sell enough without crashing price to ~zero. So kind of misleading to say it’s liquidity when it’s really (most likely) insolvency in practical terms.
Whatever happened was life and death and happened two days ago.
I’d say the thing that was life and death for them wasn’t so much the price of the token (that was only a trigger) but the bank run that came after the token situation hit the news. Even if the token had stayed at the same price temporarily, no one could seriously expect their stake to be worth “number of coins times price at the time” (or 50% of that, which one source reported they had “conservatively” marked it down to) given the low liquidity / low historical sales volume of the token, the fact that they had so so much of the supply, and the logic of the token dynamics where the token does well when FTX/Alameda do well, but not when they’re forced to liquidate because they’re already looking like they’re under water.
So basically, I think it sets up a misleading narrative if we think of this as “if only the price of the token hadn’t tanked due to unforeseen events (pressure by Binance).” In reality, the token wasn’t worth as much as it showed on their balance sheet, and that was obvious, so it was bad for them that the balance sheet leaked, which doesn’t sound good and makes you think “why and how did they get into that situation in the first place if they’re supposed to take care of customer assets safely?”
50% is crazy if true. Even 10% would be generous. Conservative would be 1%, or not counting FTT at all! It’s like they didn’t countenance the possibility of a bank run, even after giving their arch nemesis a ton of FTT :( (Or maybe they did, and just hoped it would all come good via enough profits or something before it blew up).
Yes, as you say, the FTT token wasn’t worth anything even before the crash, the FTX/Alameda money to prop it up is what was operative, and is gone now.
We haven’t discussed anything that would contradict the overwhelming evidence that FTX has a gap of $4B or more.
Low information threads seem undesirable if there are people who are less informed and had very high/trust in SBF, partially due to EA associations.
They probably have on their balance sheet other illiquid low-circulation coins with inflated market cap where they were early investors or even (partly) coin developers, so it’s possible that the claim was technically true at the time Sam stated it.
Of course, it’s an annoying game to play when you can’t assume that people communicate with an intent to convey all relevant information as clearly and comprehensively as possible, so if we have to go to these convoluted interpretations, so much has already been lost.
Yeah but the same is true of FTT under the assumption that FTX/Alameda rely on FTT for emergency liquidity.
I guess if someone had faith that FTX/Alameda would never sell a lot of it at once, but instead slowly sell over many years while keeping the exchange operating with profits, then FTT could be worth something for buyers. But on this model it doesn’t make sense to use it as collateral, let alone in any relation to backup for customer funds.
(TBC, we’re not 100% what happened, but ifFTT was involved in securing customer funds, that’s very dumb at best and quite possibly illegal, as discussed by Matt Levine.)
You probably know all of this – I’m just commenting because IMO it’s misleading to think of FTT price dropping as “the thing that was life or death for them.” (Or maybe it was in a “proximate cause” kind of way, but the real problem was the reliance on FTT in the first place.)
it’s misleading to think of FTT price dropping as “the thing that was life or death for them.” (Or maybe it was in a “proximate cause” kind of way, but the real problem was the reliance on FTT in the first place.)
It’s more like FTT was a quasi peg, they needed to keep it up at $>20. The fight that was life and death was keeping it that high with their resources.
I interpreted it as him saying that, even with FTT 80% down (and similar for other holdings), they still have enough to cover customer balances. And I’m saying that would only be true in theory as the price could still go down a lot further (and would if they liquidated all their holdings). According to the balance sheets, they held something close to the entire marketcap of FTT as based on circulating coins even before the crash. It’s unlikely they’ve sold even a tiny fraction of that.
The ones that were reported by Coindesk and others last week, for which their legitimacy wasn’t disputed (although here Caroline claims there is more).
If it was just a liquidity issue, surely you’d think they would’ve been able to fix it by now. It’s quick and easy to sell crypto tokens, even OTC.
“4) FTX International currently has a total market value of assets/collateral higher than client deposits (moves with prices!).”—I think this is in line with the mainstream narrative of the assets (e.g. FTT) being almost completely illiquid—i.e. no way they can sell enough without crashing price to ~zero. So kind of misleading to say it’s liquidity when it’s really (most likely) insolvency in practical terms.
No, not at all. This “sale” already happened.
Right now, the tokens are “illiquid” in the same sense that “Charles He token” is illiquid, “depending on price”.
In theory, FTT at >$20 would support the whole endeavor. Whatever happened was life and death and happened two days ago.
I’d say the thing that was life and death for them wasn’t so much the price of the token (that was only a trigger) but the bank run that came after the token situation hit the news. Even if the token had stayed at the same price temporarily, no one could seriously expect their stake to be worth “number of coins times price at the time” (or 50% of that, which one source reported they had “conservatively” marked it down to) given the low liquidity / low historical sales volume of the token, the fact that they had so so much of the supply, and the logic of the token dynamics where the token does well when FTX/Alameda do well, but not when they’re forced to liquidate because they’re already looking like they’re under water.
So basically, I think it sets up a misleading narrative if we think of this as “if only the price of the token hadn’t tanked due to unforeseen events (pressure by Binance).” In reality, the token wasn’t worth as much as it showed on their balance sheet, and that was obvious, so it was bad for them that the balance sheet leaked, which doesn’t sound good and makes you think “why and how did they get into that situation in the first place if they’re supposed to take care of customer assets safely?”
50% is crazy if true. Even 10% would be generous. Conservative would be 1%, or not counting FTT at all! It’s like they didn’t countenance the possibility of a bank run, even after giving their arch nemesis a ton of FTT :( (Or maybe they did, and just hoped it would all come good via enough profits or something before it blew up).
Yes, as you say, the FTT token wasn’t worth anything even before the crash, the FTX/Alameda money to prop it up is what was operative, and is gone now.
We haven’t discussed anything that would contradict the overwhelming evidence that FTX has a gap of $4B or more.
Low information threads seem undesirable if there are people who are less informed and had very high/trust in SBF, partially due to EA associations.
They probably have on their balance sheet other illiquid low-circulation coins with inflated market cap where they were early investors or even (partly) coin developers, so it’s possible that the claim was technically true at the time Sam stated it.
Of course, it’s an annoying game to play when you can’t assume that people communicate with an intent to convey all relevant information as clearly and comprehensively as possible, so if we have to go to these convoluted interpretations, so much has already been lost.
For Alameda, other “coins” were covered in the link in my first post, it’s pretty clear that they aren’t worth anything, even if there was no crisis.
https://dirtybubblemedia.substack.com/p/is-alameda-research-insolvent
This is probably true of any “projects” on FTX that the entities control.
Yeah but the same is true of FTT under the assumption that FTX/Alameda rely on FTT for emergency liquidity.
I guess if someone had faith that FTX/Alameda would never sell a lot of it at once, but instead slowly sell over many years while keeping the exchange operating with profits, then FTT could be worth something for buyers. But on this model it doesn’t make sense to use it as collateral, let alone in any relation to backup for customer funds.
(TBC, we’re not 100% what happened, but if FTT was involved in securing customer funds, that’s very dumb at best and quite possibly illegal, as discussed by Matt Levine.)
You probably know all of this – I’m just commenting because IMO it’s misleading to think of FTT price dropping as “the thing that was life or death for them.” (Or maybe it was in a “proximate cause” kind of way, but the real problem was the reliance on FTT in the first place.)
Yes, I think we’re agreed.
It’s more like FTT was a quasi peg, they needed to keep it up at $>20. The fight that was life and death was keeping it that high with their resources.
I interpreted it as him saying that, even with FTT 80% down (and similar for other holdings), they still have enough to cover customer balances. And I’m saying that would only be true in theory as the price could still go down a lot further (and would if they liquidated all their holdings). According to the balance sheets, they held something close to the entire marketcap of FTT as based on circulating coins even before the crash. It’s unlikely they’ve sold even a tiny fraction of that.
Are you saying you have the balance sheets for FTX? Can you link?
Unfortunately, I think what you’re saying is omitting liabilities, and that makes it very uninformative.
The ones that were reported by Coindesk and others last week, for which their legitimacy wasn’t disputed (although here Caroline claims there is more).
If it was just a liquidity issue, surely you’d think they would’ve been able to fix it by now. It’s quick and easy to sell crypto tokens, even OTC.
Those are Alameda balance sheets.
Fair enough. WSJ story here saying that Alameda owed FTX $10B!