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The Wolf Den #618 - The FTX Saga Continues

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November 10 · Issue #618 · View online
The Wolf Den Crypto Newsletter
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In This Issue:
  1. The FTX Saga Continues
  2. Bitcoin Thoughts And Analysis
  3. Legacy Markets
  4. Genesis Reports Losses
  5. Arthur Hayes Weighs In
  6. Proof Of Reserves Is The Gold Standard
  7. My Recommended Platforms And Tools
The FTX Saga Continues
If there was another topic to discuss, then I would happily take the opportunity to dive in. But it is immensely clear that everything has changed and that we need to adjust to our new reality. All bets are off for crypto at the moment.
Each day I try to process the news and the facts. And each day the situation is far worse than my eternal optimism can fathom.
I was inclined to believe that FTX customers would be made whole. It took less than 24 hours for Binance to scrap the FTX bail out. The balance sheet must have been atrocious for this to happen so quickly. Some believe that the hole is at least $8B.
Now FTX customers are left in a situation familiar to those of us that have exposure to Voyager and Celsius. I feel deeply for them, as I continue to ride this horrific roller coaster as well. There’s nothing fun about this process.
I trusted Steve Ehrlich at Voyager and took him at his word. I trusted that SBF was a genius trader and CEO with the interests of the crypto industry at heart.
It seems we are too trusting.
Here’s a great thread from Kraken CEO (soon to be ex) Jesse Powell that captures this sentiment well.
Jesse Powell
1/ This industry is made up of so many smart, passionate, open-minded, welcoming people, with genuine humanitarian interest at heart.

I know we're going to get past this. True believers will not be deterred. But, this is a massive setback. I'm really trying to control my rage.
Jesse has the benefit of running a business within the United States, with the insight and clarity of experience dealing with regulators and legislators. He highlighted the most important point that should be shouted from the rooftops - that US Regulators are equally responsible for our predicament.
Jesse Powell
11/ US lawmakers & regulators have some accountability too. You drove this business offshore because you refused to provide a workable regime under which these services could be offered in a supervised manner. Enforcement wrongfully focuses on convenient, on-shore good actors.
Brian Armstrong, the CEO of Coinbase said similar in multiple tweet threads, including this based response to Elizabeth Warren’s call for heavy handed regulation.
Brian Armstrong
@SenWarren @SECGov https://t.co/0HxlRiI6Sy was an offshore exchange not regulated by the SEC.

The problem is that the SEC failed to create regulatory clarity here in the US, so many American investors (and 95% of trading activity) went offshore.

Punishing US companies for this makes no sense.
I have high hopes but low expectations when it comes to the future of the industry in the United States. You can only inflict so much pain and damage on your own industry before the power that be step in and say that enough is enough.
But the onus still lies with the regulators themselves. If they had offered our industry even a shred of clarity over the past few years, then these blowups could have been largely averted.
We have covered this saga endlessly. The facts are still emerging. It is exhausting.
Instead of offering further thoughts on the developing situation, I will simply share a few videos.
Yesterday, I hosted a spontaneous livestream with industry experts to discuss the situation. Steve McClurg, Dave Weisberger, Tom Dunleavy and the incomparable Edan Yago all joined.
They offered far more insight than I could.
FTX Totally Destroyed | Crypto Collapses | What Should You Do?
Today at 9:30 AM I am doing it again, this time with Caitlin Long, Mike Alfred and David Duong. This is not to be missed, and is likely to summarize the fluid situation more thoroughly than I am currently able to.
Tune in, because I will likely ask the questions that all of you are dying to get answers to. I do not currently have the link, but it will be available on my YouTube channel.
Bitcoin Thoughts And Analysis
WEEKLY CHART
I am sharing the weekly chart to show you clear levels of support and resistance on a larger time frame. The area around $16,200 is certainly one of them, with $13,880 below. $17,592 is now a key resistance, which was formerly the 2022 low.
As you can see, price made a lower low below that level, confirming the lower high at $25,212. That now becomes the line to break to signal an end in bearish market structure.
Not much to say. We need to let the contagion clear and to see the charts reset to gain much real insight.
Legacy Markets
Stock Market Today: Dow, S&P Live Updates for Nov. 10 - Bloomberg
“US stock-index futures rose, while Treasuries slipped, as investors remained on the edge before a report projected to show inflation in the world’s largest economy moderated for a fourth successive month.
Investors are looking for firmer signs of a peak in US inflation that could herald a slowdown in the pace and severity of the Federal Reserve’s monetary tightening. While economists forecast year-on-year headline inflation fell to 7.9% for October, traders remain cautious given the reading has repeatedly overshot projections this year. According to a scenario analysis by JPMorgan Chase & Co., the S&P 500 could rally more than 5% if the reading falls to 7.6% or below, but a higher-than-estimated figure would spark a 6% slump.
“The consumer price index is the center of attention,” Stephen Innes, managing partner at SPI Asset Management, wrote in a note. “An upside surprise could be temporarily painful given the current risk-off momentum. Investors are still incredibly jittery due to the crypto train wreck, US election bets that failed to materialize, and the seemingly never-ending Covid malaise in China.””
Key events this week:
  • US CPI, US initial jobless claims, Thursday
  • Fed officials Lorie Logan, Esther George, Loretta Mester speak at events, Thursday
  • US University of Michigan consumer sentiment, Friday
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Some of the main moves in markets:
Stocks
  • The Stoxx Europe 600 fell 0.1% as of 9:42 a.m. London time
  • Futures on the S&P 500 rose 0.3%
  • Futures on the Nasdaq 100 rose 0.4%
  • Futures on the Dow Jones Industrial Average rose 0.3%
  • The MSCI Asia Pacific Index fell 1.2%
  • The MSCI Emerging Markets Index fell 1.4%
Currencies
  • The Bloomberg Dollar Spot Index was little changed
  • The euro fell 0.4% to $0.9975
  • The Japanese yen was little changed at 146.35 per dollar
  • The offshore yuan rose 0.2% to 7.2575 per dollar
  • The British pound rose 0.2% to $1.1380
Cryptocurrencies
  • Bitcoin rose 6% to $16,672.45
  • Ether rose 8% to $1,194.49
Bonds
  • The yield on 10-year Treasuries rose one basis point to 4.10%
  • Germany’s 10-year yield advanced one basis point to 2.18%
  • Britain’s 10-year yield advanced four basis points to 3.50%
Commodities
  • Brent crude rose 0.2% to $92.81 a barrel
  • Spot gold was little changed
Genesis Reports Losses
The Block: Genesis reports losses of around $7 million after hedging against market volatility
Genesis Trading was assumed to be tied to FTX and Alameda. That is partially true. But there is some good news. The firm hedged and sold its collateral in anticipation of recent events, only losing 7 million dollars in the process. The collapse of Genesis would have been another huge hit. That was seemingly avoided, for now.
Some of the other major players rushing to deny exposure include Maple Finance, Bitfinex, Tether, Circle, and Coinbase.
There will inevitably be a longer tail of companies that blowup after this FTX disaster. The contagion will spread.
Arthur Hayes Weighs In
Arthur Hayes
"In this moment, I am euphoric"

As promised my take on the FTX/Alameda/Binance saga.

https://t.co/KLX48YWTct https://t.co/gf39ugNTe9
Every “professional” opinion should be taken with a grain of salt. While I am not a fan of his previous antics (he was the SBF of Bitmex), Arthur is eloquent and his words are entertaining to read. This is not an endorsement of his ideas. I am simply sharing one opinion that is worth considering as you come to terms with the situation.
Here are a few specific thoughts from his piece.
But the good thing about crypto is that no central bank will be riding the rescue with freshly printed fiat shitcoins to bolster the balance sheets of reckless companies. The crypto industry will be forced to devour its humble pie quickly — leading to a speedy recovery that leaves it stronger than ever.
Before I end this essay, let me be clear: centralized exchanges will always face these issues of mistrust on behalf of their customers. FTX was not the first high-profile exchange to fail and it won’t be the last. But throughout all this, blocks on the Bitcoin, Ethereum, and all other blockchains were still produced and verified. Decentralized money and finance have and will continue to survive and thrive in the face of the failures of centralized entities.
Arthur, like myself, is an optimist. This is probably why I enjoy his work. He smiles in the face of adversity and rages against the misery and FUD in the space. He is definitely right about one thing - despite the chaos, blocks are still being produced. The industry may be blowing up, but the technology and assets are still beautiful and earth shattering.
Proof Of Reserves Is The Gold Standard
Crypto.com commits to proof-of-reserves after halting certain deposits and withdrawals
There is no more room for uncertainty. We need to see the books. Either exchanges have the funds or they don’t. Proof of reserves will show us. Crypto.com CEO Kris Marszalek said the company will soon be publishing proof of reserves and that it’s necessary for other platforms to do so as well. Binance has already committed to the same. Assuming this becomes the standard, other exchanges will be forced to follow suit if they want any sense of credibility in the space. This is probably our only way to build back better.
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to “Buy,” “Sell,” or “Hold” an investment.
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