Are we allowed to talk about Bitcoin?

That FTX thing is a complete shit show. I am hearing privately that there are going to be at lesat $2 billion of losses to some institutional players. But while the world is shocked, I was saying 2, 3 years ago that it was absurd that this had a $32 billion valuation. It was the epic malinvestment being spurred on by the Federal Reserve and the other monetary mandarins around the world, and there are going to be a lot of things like this getting into trouble as long as they keep trying to normalize interest rates. They have blown massive bubbles on a scale never seen before, created trillions of dollars of bubbled up assets and zombie companies that were being valued ridiculously, and there is no way to let the air out of the balloon it correcting itself. This shouldn't surprise anyone, and it's just the tip of the iceberg.

 

This is not a "bros" thing.

Unfortunately, a lot of people from all walks of life got sucked into things (not just cryptos) in the fear of missing out environment that took hold, and it has created a little pain for a lot of people as bubbles are deflating because money isn't as cheap as it was anymore.

 

Bitcoin (and other block chain technology tokens) may have viability for practical reasons in the future.

But the way people have valued a lot of things is out of whack.

This is what happens when you unleash monetary inflation. ... all of the money created out of thin air in the form of mispriced debt found its way into assets. Assets with a "story" got particularly insane valuations, as they often do.

 

It's a little complicated to explain in a soundbite.

FTX is not just an exchange, it has involved itself in other businesses. It has a sister company within FTX called Alameda (which was doing trading, some of it highly leveraged trading in a cheap money environment. ... where these things always go wrong).

Binance, another crypto exchange, was an early investor in FTX. FTX was started by a guy named Sam Bankman-Fried, the guy behind Binance goes by the name CZ, and the two of them have had disagreements about how crypto should be regulated. So CZ may have been trying to take Bankman-Fried down.

FTX (Bankman-Fried) started it's own token called FTT, and the short of it is that Alameda's trading operation leveraged itself to the token, which bubbled up in value, the way a lot of things have. Alameda's balance sheet was swimming in billions of dollars worth of the token, as we found out. When stories about that started to drop last week, CZ (Binance) tweeted that he was selling his entire FTT holdings, and the token promptly lost 90 percent of its value as a bubble deflated all at once.

When the tide goes out, you find out who is swimming naked. ... and that is Alameda, which on top of taking huge losses on its leveraged position, was being propped up (illegally probably) by FTX, which was probably (not sure we know the details yet) comingling its customers funds with its trading operation, a big no no. Those customer funds are supposed to be kept segregated. But when people get in trouble financially, they do stupid things to try to fix it.

The result is that they had to suspend withdrawals, and when it all gets sorted out there are probably going to people who aren't made whole.