Strengths
- Of the cryptocurrencies tracked by CoinMarketCap, the best performer for the week was PAX Gold, rising 5.66%. Oil and gas giant Shell announced Thursday that it signed a two-year conference sponsorship with Bitcoin Magazine, a leading crypto publication, reports the media outlet. Representatives from Shell will speak on the mining stage about improving the energy costs of Bitcoin mining, using the company’s own lubricant and cooling solutions.
- BingX, the leading crypto social trading exchange, introduced a new bug bounty program on HackenProof. HackenProof is a web3 bug bounty platform trusted by the crypto market that connects its customers with the global hacker community to uncover security issues in their products. This program rewards both users and security researchers to find and report bugs in its ecosystem with cash.
- U.S. Senators John Boozman and Debbie Stabenow put out separate statements on Thursday highlighting their arguments in the wake of the turmoil at Sam Bankman-Fried’s FTX exchange and sister trading house Alameda Research. Lead sponsors of the legislation would give the Commodity Futures Trading Commission sweeping powers to regulate crypto assets directly while the FTX crisis underscores the need for greater oversight of the industry.
Weaknesses
- Of the cryptocurrencies tracked by CoinMarketCap, the worst performer for the week was FTX Token, losing 89.33%. Bloomberg reports that this week’s rout in cryptocurrencies deepened, with Bitcoin tumbling to the lowest levels in two years, with the collapse of FTX.com. Bitcoin, the largest token by market value, fell as much as 16% to $15,731.30 on Wednesday, the lowest since November 2020. That brings this week’s decline to about 20%. It reached a record high of almost $69,000 a year ago. Nearly every digital coin was struggling; Ether, Solana, Polkadot, and Avalanche all dropped. FTT, the utility token of the FTX Exchange, collapsed by more than 40%, following a more-than-70% tumble on Tuesday.
- Core Scientific Inc., the Bitcoin miner that warned last month that it might seek bankruptcy protection, said its reserve of the digital token has dwindled to 62 coins as of October, from more than 8,000 earlier this year. Low Bitcoin prices, soaring energy costs, and fierce competition among miners have battered Bitcoin miners who took out billions of dollars of loans to fund their expansions during the bull run starting last November. Other miners, such as Argo Blockchain PLC and Iris Energy, are also struggling to repay debt.
- Decentralized finance is feeling the pain of Binance’s proposed, but dropped, takeover of FTX.com, with investors yanking cash from projects as uncertainty lingers about the future of one of the largest crypto exchanges. The total value of cash locked in DeFi dropped by more than 12% in a single day, after hovering around $50 billion to $60 billion since June, according to data tracker DeFi Llama. That number stood at more than $180 billion last December.
Opportunities
- Singapore’s desire to be a hub for the so-called web3 industry conflicts with the city-state’s proposed curbs on retail crypto trading, Coinbase Global Inc.’s Chief Executive Officer Brian Armstrong said. The nebulous term “web3” refers to a vision of a decentralized internet built around blockchains, crypto’s underlying technology. Asian economies including Singapore, Hong Kong and Japan are jostling to be at the forefront of the technology, anticipating it can aid economic expansion. Singapore is seeking to clamp down on retail-investor access to crypto trading to shield consumers from a volatile market that endured a $2 trillion rout over the past year.
- Bitcoin baseball team Perth Heat is now allowing fans to send micropayments to players with Bitcoin through Lightning, reports Bitcoin Magazine. Last year, the team became the first sports club to operate on a Bitcoin Standard. The feature was developed in collaboration with IBEX, the team’s official Bitcoin Lightning processor, and will be available starting on Perth Heat’s next game on November 11, 2022, the article explains.
- Cameron Crise, Bloomberg macro strategist, writes this week that the crypto crash reminded him of when Robert Heinlein popularized the phrase “there ain’t no such thing as a free lunch,” in the 1960s, but for much of the past several years the crypto industry has tried to dispute it. The bill, it seems, is now coming due. Generally speaking, if something seems too good to be true, it usually is. And when actors, supermodels, and sports stadiums are all telling at you to get excited about a financial innovation that entails heavy ownership of illiquid assets…perhaps consider walking the other way.
Threats
- Crypto markets face weeks of deleveraging in the fallout from the crisis at digital-asset exchange FTX.com, a period of upheaval that could push Bitcoin down to $13,000, according to JPMorgan Chase & Co. strategists. A “cascade of margin calls” is likely underway given the interplay between the exchange, its sister trading house Alameda Research, and the rest of the crypto ecosystem, a team led by Nikolaos Panigirtzoglou wrote in a note. “What makes this new phase of crypto deleveraging induced by the apparent collapse of Alameda Research and FTX more problematic is that the number of entities with stronger balance sheets able to rescue those with low capital and high leverage is shrinking” in the crypto sphere, the team said Wednesday.
- Crypto exchange FTX lent billions of dollars’ worth of customer assets to fund risky bets by its affiliated trading firm, Alameda Research, setting the stage for the exchange's implosion, a person familiar with the matter said. FTX Chief Executive Sam Bankman-Fried (who stepped down Friday) told an investor this week that Alameda owes FTX about $10 billion, the person said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, according to the person. The FTX.com fiasco has ensnared some of the biggest names in finance.
- Bitcoin is currently trading around its lows of the year, which is feeding through into broader risk sentiment. It’s been said that the crypto industry has tried to compress all the mistakes of the past few centuries of traditional finance into the span of a few years-- FTX and associated companies allegedly encapsulate a lot of those errors themselves. It turns out that the lack of a credible lender of last resort in decentralized finance might be a bug, rather than a feature.
