Crypto Exchange FTX

I thought this was a fun - although lengthy - read of just how the cryptocurrency exchange, FTX, crashed spectacularly recently.

https://www.bloomberg.com/opinion/articles/2022-11-14/ftx-s-balance-sheet-was-bad

(it’s behind a paywall but you can register for a free article by using a temp email here to bypass it)

I’m not an economist and will admit that I don’t fully understand the intricacies of currency trading. However, I’ve been fascinated by the cryptocurrency market for years - mostly because I can understand the cryptography side of cryptocurrencies. This article explained it in terms even I can understand :stuck_out_tongue_winking_eye:

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Here’s an extract:

If a troubled company has a few days to beg potential investors for a bailout before it files for bankruptcy, and it sends those investors its balance sheet so they can consider investing, and they all pass, and then the company files for bankruptcy, of course the balance sheet was bad . That is not a state of affairs that is consistent with a pristine fortress balance sheet.

But there is a range of possible badness, even in bankruptcy, and the balance sheet that Sam Bankman-Fried’s failed crypto exchange FTX.com sent to potential investors last week before filing for bankruptcy on Friday is very bad. It’s an Excel file full of the howling of ghosts and the shrieking of tortured souls. If you look too long at that spreadsheet, you will go insane. Antoine Gara, Kadhim Shubber and Joshua Oliver at the Financial Times reported on Saturday:

Sam Bankman-Fried’s main international FTX exchange held just $900mn in easily sellable assets against $9bn of liabilities the day before it collapsed into bankruptcy, according to investment materials seen by the Financial Times.

The largest portion of those liquid assets listed on a FTX international balance sheet dated Thursday was $470mn of Robinhood shares owned by a Bankman-Fried vehicle not listed in Friday’s bankruptcy filing, which included 134 corporate entities.

Seems bad, but it somehow keeps getting worse:

A spreadsheet listing FTX international’s assets and liabilities, seen by the Financial Times, point at the issues that brought Bankman-Fried crashing back down to earth. It references $5bn of withdrawals last Sunday, and a negative $8bn entry described as “hidden, poorly internally labled ‘fiat@’ account”.

What.

The vast majority of FTX Trading’s recorded assets are either illiquid venture capital investments or crypto tokens that are not widely traded, according to the spreadsheet, which cautions that the figures “are rough values, and could be slightly off; there is also obviously a chance of typos etc. They also change a bit over time as trades happen.”

What.

In all, the spreadsheet says FTX Trading’s assets were $900mn of “liquid” assets, $5.5bn of “less liquid” assets consisting of crypto tokens, and $3.2bn of illiquid private equity investments. There is also an obscure $7mn holding called “TRUMPLOSE”. There are no bitcoin assets listed, despite bitcoin liabilities of $1.4bn.

Crypto is essentially a Ponzi scheme, it was all going to end in tears at some point.

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Yes, I agree. I’m kinda surprised it’s has lasted as long as it has really. I guess there’s an almost endless supply of gullible people ready to get rich quick.

I guess, if you got in waaaaaaaaay back and mined in the day when a fast CPU was all you needed then sold at or near one of the market highs you would be laughing all the way to the bank, or is that crypto exchange.

But buying Bitcoin was always a mugs game.

Fascination is good, filling your boots, not so much :roll_eyes:

I remember the ‘happy’ days of bitcoin being an under-the-radar slightly subversive currency: one of the guys on Diaspora had a server fail and asked for bitcoin donations to help get back up. At the time 1 bitcoin=$1.

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CNET :- Bitcoin mining uses around as much energy as Argentina, according to the Bitcoin Energy Consumption Index, and at that annualized level of 131.26 terawatt-hours, crypto mining would be in the top 30 of countries based on energy consumption.

Energy consumption for bitcoin mining was at its highest at the end of 2021 and the early months of 2022, consuming more than 200 terawatt-hours.

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Yes, that’s another problem with the bloody stuff. TBH that alone is enough reason to scrap it.

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Yes, and in the U.S. (where else !), a company apparently purchased and reopened a coal fired power station for the sole purpose of generating power for a massive bit mining operation.

Interesting article on The Register - FTX currently being managed by the man who dealt with Enron, described the situation as unprecedented. It appears to have been organised to deliberately break all norms and conventions of good business practice, making tracking of assets virtually impossible.

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No wonder the issuers of fiat currencies didn’t like crypto then.