It was a big week in crypto again as the fallout of FTX continues. This time we’re hearing more and more about the contagion and who was affected. Much of this is coming from the great Twitter Spaces events showing the strength of citizen journalism (as well as other news sources). The biggest Spaces events continue to be from user @MarioNawfal as they had a wide range of folks join them from FTX Insiders to politicians, CZ from Binance and even the infamous Martin Shkreli amongst other finance/Twitter celebrities. Some of the quotes from these Spaces just on Monday:
“If you’re building in blockchain/crypto for the right reasons then none of that should have changed with the recent events that have happened”
“Using the tools and employing it correctly - we can be more regulatory compliant than public markets”
On potential hardline regulations because of the FTX saga “Don’t kill this new one as it might be better than the old one”
“Dont make permanent decisions based on temporary emotions - we’re here together, we’ll fight together, we’ll win together.”
“Crazy that people treated exchanges as bank accounts - at best you’re a creditor with an offshore entity”
We saw further calls to pull money off exchanges as well as reduce risk - see this tweet from our very own Numbers
Whilst this isn’t great for crypto, it’s important to put things into context. TradFi has had much larger issues and has been much more regulated. It doesn’t make crypto better but it’s certainly not alone.
UCITS funds - Madoff - $50bn
Allen Stanford - $8 billion
Tom Petters - $3.65 billion
Scott Rothstein - $1.2 billion
Marc Dreier - $700 million
Samuel Israel - $450 million
Much more needs to be done that’s for sure and we’ll only get to it if we get realistic about what blockchain tech can do and actually use the tools for what they’re good for so we don’t again, go and blindly trust and have this FTX drama happen again.
Anyway, before we get to the news we’ll end this intro on a lighter note as we were lucky enough to interview new Sydney-sider and Binance Product Manager, Charis Campbell for our podcast. Check it out
Speaking of media, we also had members of the team in the media here with Nick Bishop on ausbiz here on Friday https://www.ausbiz.com.au/media/amidst-the-crypto-fallout-whats-the-tactical-way-forward-for-investors?videoId=25548
Then later that day we had Arturo on show as well to wrap up the week on The Call. A great show so make sure you subscribe to it.
We also saw some great events going on for Aus DeFi with the team in Brissie running another awesome show
And in Sydney on the same night our partners at NotCentralised also ran a web3 teach in for those in TradFi that yielded great discussions
Numbers shares some slides too and you can see that here.
Finishing off the week was NFT Sydney with their Down Bad meetup bringing people together who might be feeling the affects of the market (and they’re great at sarcasm as you can see below).
Market News
We’ll kick off with even more in the SBF saga including this piece showing the SBF text exchange with Vox journalist Kelsey Piper. It’s eye-opening to say the least https://www.vox.com/future-perfect/23462333/sam-bankman-fried-ftx-cryptocurrency-effective-altruism-crypto-bahamas-philanthropy
One of the worst things about all of this was seeing John Ray, former liquidator on Enron calling this the worst case of corporate falutre he had ever seen
There was also Binance offering to create a fund to help users. Even Kim Dotcom founder of Megaupload and fugitive praised it
But questions around this are whether this concentrates too much power to them or if Binance becomes the lender of last resort in crypto
The Defiant looked into this too
Locally, mainstream media had a field day with the negative news. There was this piece from Michael Roddan at the AFR - https://www.afr.com/rear-window/australia-s-reliable-crypto-swashbucklers-20221116-p5bypl
But Stephen Bartholomeusz at the SMH saw a silver lining - https://www.smh.com.au/business/markets/the-ftx-horror-show-might-have-a-silver-lining-for-the-crypto-industry-20221117-p5bz05.html
The New York Times had their take on FTX too, but this was largely seen as going easey on SBF so others countered with articles like this - https://milkyeggs.com/?p=175
Contagion
Looking into contagion risk, it wasn’t just global firms. Reports came out showing Telstra Ventures had exposure to FTX along with firms like Digital Surge.
Globally, the list was far wider with every day seeming to bring out new names like Ikigai, Genesis, Liquid Global, BlockFi, AAX and more being affected. One Twitter user has been keeping track of some of those affected as well - see this Google Docs link https://docs.google.com/document/d/1R6NDtIOB2T0f4lQNv-NO2YIbQvAlbzMx-EqQvVxDL4Q/edit#
Fake News
With all the news we also saw false news so be careful about what you read out there and look beyond the headlines. Some examples
Yung Dot pretending to be a dev but then 0xfoobar (and others in comments) highlighting issues with this take
Non-FTX (because everything else is this past week)
If you’re into DAOs - check out this piece from Joni Pirovich and the folks at LawFi DAO https://www.linkedin.com/feed/update/urn:li:activity:6998734496669859840/
Also on LinkedIn, I wrote up this piece including link to Vitalik’s new piece on improvinng Proof of Solvency - https://www.linkedin.com/posts/activity-6999869394696757248-82_b/
With the upcoming G20 Summit also covering crypto (https://beincrypto.com/g20-summit-to-focus-on-global-crypto-framework-and-penalize-countries-that-dont-comply/), it’ll be very interesting to see whether something positive comes out of this or not. Regulations could go as hard as to stifle innovation but we’ll have to wait and see.
In other news, NFTs look to have a new player with Sony potentially entering the game as they are investigating patents
Also there was this piece from The Defiant highlighting JP Morgan’s use of blockchain and how they moved from thinking only private blockchains to also embracing public. They saw the benefits of its scale, persistent settlement rails, transparency and composabiltiy as solving for issues they’d seen prior. They also highlight ways in which fractional reserve banking can be done better with regulated institutions compared to FTX, UST and the like that have failed -
And here’s some other bullish news where it was only a matter of time - https://www.cryptotimes.io/rolex-files-for-crypto-nfts-and-metaverse-trademarks/
Digital dollar pilot at Bank of America Merrill Lynch in the US https://decrypt.co/114761/us-banks-launch-digital-dollar-blockchain-platform-pilot
On Proof of Reserves - CZ and Binance are looking (already) to improve upon it with Ethereum founder Vitalik - https://www.crypto-news-flash.com/ethereums-vitalik-buterin-and-binance-partner-to-pilot-new-proof-of-reserves-method-for-exchanges/
Data
Here’s a dive into Alameda from the auditor perspective