Richardcyoung.com

The Online Home of Author and Investor, Dick Young

  • Home
  • How We Are Different
  • About Us
    • Foundation Principles
    • Contributors
  • Investing
    • You’ve Read The Last Issue of Intelligence Report, Now What?
  • Your Survival Guy
  • The Great Reset
  • COVID-19
  • My Rifles
  • Dividends and Compounding
  • Your Security
  • The Swiss Way
  • Dick Young
  • Debbie Young
  • Key West
  • Paris
  • Dick’s R&B Top 100
  • Liberty & Freedom Map
  • Bank Credit & Money
  • Your Survival Guy’s Super States
  • NNT & Cholesterol
  • Work to Make Money/Invest to Save Money
  • Your Health
  • Ron Paul
  • US Treasury Yield Curve: My Favorite Investor Tool

What Held Up FTT Tokens?

November 29, 2022 By Debbie Young

By ioda @ Shutterstock.com

Air? Nothing but air. Well, maybe a drop or two of Fairy Dust. As Andy Kessler reminds his readers in the WSJ, air doesn’t hold up much. Likewise Fairy Dust.

FTX’s original sin was to borrow against its own FTT token.

Most of (the) platforms are now frozen and might disappear as customers caught with a hot potato frantically demand withdrawals in the wake of the FTX collapse.

But, as Kessler marvels, where were the questions? Who asked, what’s up?

Astonishing? No one asked?

Two Easy Questions:

  1. What is the underlying collateral?
  2. What are the assets?

Neither question would have had a comforting answer. Still, Mr. Kessler notes, no one asked.

Crypto’s Mass Delusion

FTX and Alameda empires “misappropriated” funds (a nice way to put it, understates Kessler).

And yes, withdrawals that acted like a bank run drove the company into Chapter 11.

The Fatal Conceit: Sam Coins vs. Scam Coins

FTX could set any price. But not forever, cautions Mr. Kessler:

FTT was so thinly traded that FTX could set any price ….

FTX and Alameda borrowed against tokens they themselves were manipulating, including Solana and others, which some called Sam Coins, now Scam Coins.

The fatal conceit: They thought FTT would stay high forever, so they invested in often illiquid positions. FTX was even paying employees, vendors and whoever else would take it in FTT tokens, whose total market cap used to be almost $10 billion and is now about $400 million.

Does reality eventually replace illusion? Well, in this case, reality eventually replaced illusion, but according to Andy K., a pinprick took down a bunch of stuff.

After Coindesk leaked a copy of Alameda’s balance sheet loaded with FTT tokens, Binance CEO Changpeng Zhao started selling. FTT went from $22 to under $3 in 48 hours. So much for collateral. When the smoke clears, FTX/Alameda may have $8 billion to $15 billion in debt outstanding, with little to sell for repayment.

It will take years to sort out who gets what.

Cottage industry firms jumped in to lever up crypto, and that’s when things turned dicey. They helped magnify toxicity by luring in customers by paying interest on their crypto holdings. But, one wonders, how could anyone pay interest on crypto?

By turning around and lending it out to hedge funds and others who also used leverage.

Insanity, Mr. Kessler reminds readers.

Most of these platforms are now frozen and might disappear as customers caught with a hot potato frantically demand withdrawals in the wake of the FTX collapse.

Of course, all these crypto lenders had to do was ask.

The hard questions:

  1. What’s the underlying collateral?
  2. Where are the assets?

With no good answer, Kessler reiterates, “no sane lender would have lent against it.”

But no one asked.

 

If you’re willing to fight for Main Street America, click here to sign up for the Richardcyoung.com free weekly email.

Related Posts

  • Sweden Puts the Brakes on its Cashless Society Plans
  • Digital Currency Risks: Sweden Considers Cashless Society
  • The Threat of a Cashless Society
  • The Threat of a Cashless Society
  • Author
  • Recent Posts
Debbie Young
Debbie, editor-in-chief of Richardcyoung.com, has been associate editor of Dick Young’s investment strategy reports for over three decades. When not in Key West, Debbie spends her free time researching and writing in and about Paris and Burgundy, France, cooking on her AGA Cooker, driving her Porsche Boxter S through Vermont and Maine, and practicing yoga.
Latest posts by Debbie Young (see all)
  • The Power of Words - January 26, 2023
  • US Debt Now Exceeds Annual GDP? - January 25, 2023
  • How the Biden Administration Is Destroying Our Energy Infrastructure - January 24, 2023

Dick Young’s Must Reads

  • The Claremont Institute: Protecting the American Way of Life
  • Victor Davis Hanson: How to Bust DC’s Stronghold
  • Making America Great Again Is What America Wants
  • To Me There Isn’t a Better Way to Live
  • Ron Paul: “Freedom and Central Banking Are Not Compatible”
  • DONBAS: Russian Tanks Face Gauntlet of Death from Javelin Wielding Ukrainians
  • My Key West Garden Office
  • The County Sheriff: America’s Last Hope
  • Biden Wants to Gut the Tax Benefit of 401K Plans
  • Florida: Enjoy Certain Freedoms and Individual Liberties

Our Most Popular Posts

  • Pfizer CEO Terrified of Real Questions About His Vaccines
  • America's Super States and Stocks that Respect YOU
  • Give Me Clean, Efficient Gas
  • How the Biden Administration Is Destroying Our Energy Infrastructure
  • The Rich Seek More from Bank Accounts
  • Artificial Intelligence Is Coming, But It's Not Quite There
  • Is Kevin McCarthy’s GOP Willing to Do What It Takes on Debt?
  • The Sound of Silence
  • Strengthen Your Defenses Against Stroke
  • Forty Years Ago, Jogging a Mile a Day and Still Going

Disclosure

RSS Youngresearch.com

  • 4 Life Changing Words for Your Survival Guy: “You Should Try This”
  • Suddenly, Holding Cash Looks Good Again to Many
  • Anti-Carbon Crusaders in Davos Talk ESG and OPM
  • Is Passive Investing Already Passé?
  • Welcome to Hotel California, Where You Can Never Leave
  • What You’re Telling Me Matters
  • Can Banks Compete with Apple Pay and PayPal?
  • America’s Super States and Stocks that Respect YOU
  • Markets Are Calling the Fed’s Bluff
  • Don’t Let Your Lazy Cash Eat all Your Food

RSS Yoursurvivalguy.com

  • 4 Life Changing Words for Your Survival Guy: “You Should Try This”
  • Anti-Carbon Crusaders in Davos Talk ESG and OPM
  • Welcome to Hotel California, Where You Can Never Leave
  • What You’re Telling Me Matters
  • The Rich Seek More from Bank Accounts
  • California’s Wealth Tax Will Drive Out Remaining Rich Residents
  • Political Establishment Irate over Conservative Challenges to ESG
  • Congratulations Mikaela Shiffrin on 83rd Win
  • America’s Super States and Stocks that Respect YOU
  • NYC Bleeding Revenue as Wealthiest Flee the City

Will Western Tanks Be a Game Changer in Ukraine?

The Power of Words

4 Life Changing Words for Your Survival Guy: “You Should Try This”

Is Putin’s Meat Grinder Working?

California Unions Could Spike the Slowly Recovering Supply Chain

Ukraine Filled with Russian Sympathizers and Collaborators

Copyright © 2023 | Terms & Conditions | About Us | Dick Young | Archives