DeFi DeBrief #13: FTX implodes ☠️
|Welcome to issue #13 of the DeFi DeBrief, your weekly digest of the biggest news in DeFi.
[Breaking news] FTX is in serious hot water 🥵
“We have come to an agreement on a strategic transaction with Binance for FTX.com.” Those were the words of Sam Bankman-Fried (known as ‘SBF’), the CEO of one of the most popular crypto exchanges in the world.
The tweet followed rumours of insolvency, likely confirmed by a follow-up from Binance CEO CZ, stating: “FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com.”
The story is playing out in real time, but there’s one thing you can probably deduce. This is no ‘strategic transaction’; Binance is chasing a distressed sale of a once-reputable crypto exchange.
That said, there are no guarantees this deal goes through. And if it doesn’t, things could turn very ugly, very quickly.
Why should you care?
Buckle up… we have some ground to cover.
FTX’s troubles started when Coindesk revealed that Alameda Research (SBF’s hedge fund with unusually close ties to his exchange) held mostly FTT (the FTX token) on its balance sheet.
For various reasons, the revelation brought Alameda’s solvency into question, undermining the value of FTT. Binance held a lot of FTT following a previous investment, and CZ said his exchange would de-risk by selling it.
Some say this was a calculated move to push FTX into troubled waters. Whatever the intent, the speed of the story suggests FTX was in acute distress. And some believe CZ might get FTX, once valued at $32 billion(!), for next-to-nothing.
No one knows the precise details of the downfall, but the fallout could be seismic. If Alameda Research fails, there will be knock-on effects across DeFi and CeFi, as many in the industry are exposed to the hedge fund.
Moreover, CZ has only suggested an intent to buy FTX. Which he may not actually do. And if he doesn’t, we could see similar repercussions to the TerraUSD unwinding. Then comes the question of regulation.
Another debacle will only encourage authorities to tighten the noose, especially given that SBF was one of the most prominent participants in discussions.
One thing’s for sure: this story will be in the headlines for some time yet.
|IN THE HEADLINES
Fidelity launches commission-free crypto trading 🙌
In brighter news, asset management heavyweight Fidelity Investments will launch a commission-free crypto trading product for retail investors. The firm is one of the largest brokerages in the world, handling $9.9 trillion in assets.
And Fidelity Crypto, it’s crypto trading product, will let investors buy and sell bitcoin and ether. The move follows research that shows a meaningful portion of Fidelity customers are already interested in (or own) crypto.
The new platform will let clients invest directly through Fidelity, charging no commissions but adding a 1% spread on every trade execution price.
IN THE HEADLINES
JP Morgan makes monumental u-turn on DeFi ⤵️ ⤴️
JPMorgan has kept crypto at arm’s length over the years. But a few days ago, the bank gave another sign its stance on DeFi is softening, using the Polygon blockchain to trade tokenised cash deposits.
The trade was part of the Monetary Authority of Singapore Project Guardian pilot, an experiment trialling foreign exchange and trading government bonds using crypto lending protocol Aave and decentralised exchange Uniswap.
The experiment successfully tokenised Singaporean dollar deposits, as well as tokenised Japanese yen assets.
Five short reads catching our eye this week:
TEMPERATURE CHECK 🔥
*Data last updated at 08:00 on 9th November.
TWEET CHECK 🐦
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