The FTX Fiasco

Not Your Keys, Not Your Coins

A nuclear bomb was detonated in the crypto space a few weeks ago when FTX, the second-largest crypto exchange, and trading platform declared bankruptcy.

Unfortunately, due to the interconnectedness of these lending & trading platforms, the FTX bankruptcy will spill over into other companies.

What does this mean for FTX users and what other companies might be at risk? What lessons can we learn, and what does this mean for Bitcoin?

Let's dig in...

To keep it short, FTX is a cryptocurrency exchange and trading platform created by the Alameda Research team, a cryptocurrency trading fund. The line between these two shady entities has always been blurred.

Following the meltdown earlier this year that took down Celsius, Voyager, and Terra Luna, Alameda experienced significant losses into the billions. This was when things started.

Here is where the story gets interesting. Instead of declaring bankruptcy immediately, Sam Bankman-Fried, the CEO of FTX, illegally used customer deposits to the tune of $8 billion to bail out his hedge fund Alameda, where he is also the CEO.

This loan was collateralized with $FTT.Fast forward to roughly three weeks ago, when Binance decided to offload their $FTT position, this caused a bank run, cascading margin calls, and drove FTX practically insolvent.

This killed the price of $FTT, and drove Alameda's losses into the billions.

Fraud. Blatant fraud. A few days later, all 134 different entities under the FTX/ Alameda umbrella declared chapter 11 bankruptcy, including FTX US, which Sam previously said was unaffected (another lie).

Many FTX users will lose their life savings.

Unfortunately, it gets worse. Other lending platforms like BlockFi have declared bankruptcy as well, as BlockFi was using FTX to custody user funds.

It is impossible to know where the contagion ends. It is almost certain this will impact more exchanges, institutions, and startups. We will likely discover who has exposure to this mess in the coming weeks and months.

However, as long as you have been staying humble and stacking sats, likely none of this impacts you!

Throughout the entirety of this newsletter, we have been preaching to stick to Bitcoin-only (no shitcoins), stay away from risky platforms offering yield for your Bitcoin, and safely secure your Bitcoin stack in a wallet that you custody yourself.

This is the entire power of Bitcoin. You do not need to rely on any third party or custodian to control your savings. You have the power to protect and control without relying on anyone.

Bitcoiners commonly reference "Not Your Keys, Not Your Coins" after the fall of Mt. Gox back in the early days of Bitcoin.

Many people are going to learn this lesson the hard way. But over time, this will lead to many more bitcoiners learning self-custody.

However, while the market is in chaos, now is a great time to stack cheap Sats!

Buying in a bear market is the best time to build your long-term Bitcoin position.