13 Nov (MUST READ): FTX files for bankruptcy, Market mayhem, Bitcoin plunges to lows of $15,700 - Premium Newsletter

Due to the chaotic fiasco in the markets, I've decided to grant early access to everyone for free on this issue only. This week’s newsletter is segregated into two parts.

Part One:

i) Crypto market mayhem. Bitcoin plunges to $15,700 from $20,000.

ii) Another titan bites the dust. FTX collapses and files for bankruptcy. Contagion spread like wildfire. BlockFi halts withdrawals.

Part Two:

i) mySPR data breach: Selfies and myKad images of 800,000 Malaysians are being sold online at a well-known database marketplace.

ii) A new rule from mySPR urges Malaysians to surrender their phones during GE15.

iii) October CPI in the US fell to 7.7%, significantly lower than market expectations of 7.9%.

Part One will be sent on Sunday night (Nov 13) while Part Two will be sent Monday evening (Nov 14).

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A summary of what I covered in my previous issue (6th November):

i) The US Federal Reserve raised the benchmark interest rate by 75 basis points as largely expected. Markets rallied initially but dumped shortly after.

ii) Bank Negara Malaysia (BNM) shadowed the Fed’s aggressive movement and raised the Overnight Policy Rate by 25 basis points to 2.75%.

iii) Fidelity Investments is offering 401(k) investors to allocate part of their portfolio into Bitcoin.

iv) The billionaire, the bird, and the dog. Elon Musk’s Twitter takeover drama deepens. Doge rallies by 260% in a week.

Read the previous issue here.

Manic, chaotic, hectic, disastrous, catastrophic - this week in a nutshell.

i) After rallying to a 3-month high of $21,500 on Nov 5, Bitcoin reversed course and plunged. On Wednesday (Nov 9), the world's largest cryptocurrency shed over 22% of its value, from $20,000 to $15,700, in less than 24 hours.

The dump is considered one of the largest single-day drops for Bitcoin this year, barely matching the market turmoil we've seen in May, when Terra (LUNA) death-spiraled to zero.

ii) The nuclear bomb landed on the crypto market when FTX, the second largest crypto exchange only rivaled by Binance, imploded from a classic "bank run" by its customers on Wednesday. The devastation that followed shook multiple crypto institutions to their knees, with many labelling this event as the "Lehman Brothers" moment of crypto.

iii) The Relative Strength Index (RSI), a useful indicator that tracks the speed and change of price movements, swung to "extreme-oversold" levels, something we haven't seen since September.

iv) $260 billion vanished from the crypto market overnight. The total market cap of crypto, which stood comfortably above $1 trillion before the crisis, sank to a 23 month low briefly to $740 billion before recovering to $800 billion.

The history of FTX and what you need to know.

-> Founded in 2019, FTX grew into a mammoth at an astonishing pace. In less than four years, it rose to be the 2nd largest cryptocurrency exchange in the world by volume, only slightly behind Binance. As of February 2022, FTX's valuation was a staggering $32 billion.

-> The CEO, Sam Bankman-Fried (SBF), owns FTX and Alameda Research (valued at $14.6 billion). Both firms were thought to be separate from each other, since the former is a crypto exchange while the latter a trading firm.

-> In March 2021, when the bull market was running hot and Bitcoin stood comfortably above $60,000, FTX bought the naming rights to the Miami Heat Stadium in Miami and renamed it to FTX Arena for $135 million.

-> From 2021 to 2022, FTX spent hundreds of millions of dollars on advertising. The firm hired top celebrities like Tom Brady, Trevor Lawrence, and Steph Curry. Advertising alone cost FTX $375 million, and that's excluding the deals made underneath the table.

-> To overtake Binance, SBF understood that he needed to get FTX regulated in powerful nations. In an effort to indirectly "bribe" politicians to be more crypto friendly, SBF became the second largest donor to the Biden campaign in 2020, having donated over $5.2 million to the Democrats. More recently, Coin Telegraph reported that SBF had plans to allocate over $1 billion to influence the 2024 presidential elections.

-> Throughout FTX's glory run, few doubted SBF's brilliance and riches. Nobody thought that he had a magic money printer. He was, at one time, labelled as the smartest crypto billionaire before everything came crashing down.

The timeline of FTX's collapse - how everything unfolded.

November 2 - CoinDesk reported a leaked balance sheet from Alameda Research (SBF's trading firm). It showed that the firm had $14.6 billion in assets, but its single largest holding is $3.66 billion of "unlocked FTT", which are the exchange tokens to FTX.

Reporters were shocked to see such a huge portion of Alameda's assets allocated in FTX's exchange tokens.

Since FTT is centrally controlled and can be literally printed out of thin air, criticisms emerged around FTX and Alameda's unusually close relationship.

November 6 - Fearing another "death-spiral" like LUNA, Binance CEO CZ announced on Sunday that the company would liquidate its entire stash of FTT tokens gradually.

The initial reaction of the market was slightly negative. FTT dipped briefly, probably due to Binance liquidating its FTT tokens.

November 7 - Three things happened.

1) The CEO of Alameda Research, Caroline Ellison, attempted to calm the sell pressure on FTT by stating that Alameda's leaked balance sheet was not truly reflected. The company had over $10 billion in assets that weren't quantified in the report.

2) Caroline then took a bold step by challenging CZ, saying that she's willing the buy up all the remaining FTT for $22.

3) The same day, CEO of FTX, Sam Bankman-Fried (SBF) said that a mysterious competitor (obviously Binance) is after the stability of the exchange, but FTX is completely fine.

Customer withdrawals spiked, but the market panic was mostly contained and FTT traded steadily at $22.

November 8 - Swamped by wave after wave of withdrawal requests, FTX was forced to temporarily halt withdrawals, as reported by The Block.

The Ponzi scheme was unveiled.

Investors, now realizing that FTX was unable to honor customer withdrawals, began fleeing by panic selling.

FTT began to tank.

November 9 - Two things happened.

1) SBF tweeted that FTX would be bought over by Binance. His previous tweet saying "Assets are fine" was subsequently deleted.

2) CZ confirms the acquisition by signing a non-binding agreement with FTX.

FTT recovered to $20 briefly from the news. But it wasn't enough.

FTX still struggled to process withdrawals. A massive 70% crash came shortly after.

November 10 - Two things happened.

1) Binance pulls out of the deal to acquire FTX, citing "corporate due diligence".

2) SBF apologizes to the public and admits that he "fucked up". He then said that the collapse was only within FTX and Alameda Research. FTX US will not be affected.

November 11 - The bombshell dropped.

SBF announced that he filed Chapter 11 bankruptcy for FTX, Alameda Research, and FTX US, where less than 24 hours ago, he stated that FTX US was fine.

The result was calamity.

Bitcoin dipped to a low of $15,700.

FTT lost 95% of its value.

Overleveraged traders who thought they could capitalize on this crisis got destroyed.

Over $1.2 billion of long positions were wiped out. A series of massive long squeezes only hastened the market's collapse.

The aftershock of this catastrophe was gradually revealed.

On Friday (Nov 11), BlockFi, one of the biggest lending/borrowing platforms in crypto, froze withdrawals.

At the same time, Crypto.com announced that it would be pausing transfers on the Solana network.

Memes flooded the market. Outrage from others turned into humor for many.

What we need to learn from this crisis.

i) Billionaires and CEOs must never be trusted. You came to crypto for financial freedom, but they’re here for fame, attention, and power. Do Kwon, Alex Mashinsky, Zu Shu, SBF, etc. are all overconfident CEOs who have a huge impact on the market whenever they tweet.

ii) Be very careful if you have funds in any lending platforms. Though many people claim that Binance is the safest place to store your crypto, that doesn’t mean that Binance is immune. NOT YOUR KEYS, NOT YOUR COINS!

iii) The contagion is not over. Be prepared to see institutions fall in the next few weeks.

iv) For those who have lost funds to the FTX debacle, please know that it is not the end. Your financial status can always be recovered, but you only have one life. Seek professional help if you need advice.

The crisis continues. There are reports about FTX being hacked, with over $600 million drained.

-> More than $600 million in crypto left the bankrupt crypto company's wallets on Friday, with little explanation as to why.

-> FTX stated in its official Telegram channel that it had been hacked, instructing users not to install any new upgrades and to delete all FTX apps.

-> Various cryptos have exited FTX’s official wallets and moved to decentralized exchanges like 1inch.

-> Many FTX wallet holders are also reporting that they are seeing $0 balances in their FTX.com and FTX US wallets. FTX’s API appears to be down, which could account for this.

Disclaimer: I am not a financial advisor. This newsletter is based on my own analysis and research. Do not take any of it as financial advice.

*This newsletter was written at 11.00 AM on 13th November 2022 and completed at 4.45 PM the same day.

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