Skip to main content

FTX, SBF, Alameda Research disaster

$15 Billion to $0

If somehow you haven't heard the news about Sam Bankman-Fried (SBF), he was the Founder of the 2nd largest crypto exchange (FTX) that has had a complete collapse.  It appears that he may have co-mingled customer deposits to the point where all the value on the books was in his own crypto token FTT.  When news caught wind that he his competitor and  CEO of the largest crypto exchange, Binance, Changpeng Zhao (CZ) was going to sell his tokens, the price for FTT token collapse exposing that FTX co-mingled funds and couldn't meet customer withdrawals.  Currrently, the exchange is halted and users are waiting to see if they'll be able to get the crypto they deposited at the exchange.

Possible Contagion

Even if you didn't have any money or investments with FTX you still may be impacted.  For example, BlockFi was bailed out by them and now have frozen accounts.  Gemini, the only other major licensed crypto exchange in New York (besides Coinbase) as been affected.  Not Gemini directly, but through their offered services of staking partner Genesis.  This is unfortunate for many users and even affected me.  I barely have any crypto, but I was started to use the Gemini credit card (which offered 3% reward) and was staking my rewards with Genesis through Gemini.  So I'm not sure if I'm ever going to get those credit card rewards (as such, I've also stopped using the Gemini Credit Card, and I can imagine many other users will do the same).

Going Forward -> self custody or products without custody risk

Going forward whether you still have faith in crypto or not, until there is more clarity security of deposits (unlike traditional banks that have FDIC or stock accounts that have SIPIC), I would imagine the prudent thing to do is self custody your crypto on a hardware wallet.  And if you don't feel comfortable doing that, then look to gain exposure to crypto through non-direct methods, like BITO ETF that invests in rolling  futures, or trade futures yourself or potentially invest in related companies like Coinbase (COIN) or miners like RIOT or MARA.  As for sizing of crypto, just keep in mind that the volatility is about 5x that of stocks and it is still an extremely risky investment that could go to 0.
Labels:

Comments

Post a Comment

Popular posts from this blog

using options to recover from a big move against me when buy a stock for shareholder benefits - RCL attempt to repair position

Shareholder Benefits Owning shares of a company can entitle you to special benefits when consuming products or services.  For example, Royal Caribbean Cruises (RCL) provides $100 onboard credit per Stateroom on Sailings of 6-13 nights.  With an upcoming cruise booked and most of my portfolio in cash, I decided to take advantage of this offer.  I've done a few cruises in the past and definitely enjoyed Royal Caribbean, especially having young children; and can imagine I will take more cruises with them in the future. The Purchase of Shares I didn't do any deep Fundamental or Technical Analysis, but looked at a 5 year chart seeing the stock priced at $135 before the COVID-19 pandemic, and during the pandemic reached a low of around $24.  When I purchased the shares it was $40 and dropped in price for the 2 preceding days.  Since I bought at the end of the day, I figured I would sell a call option (overwrite) the next day as the volatility was high around 85%....
Post a Comment
Read more

How does theta change through time when selling strangles? SPY, META, IEF

What is Theta? Theta is amount of value that an option position changes each day due to the passage of time.   For example, SPY closing at 411.99 and Implied Volatility (IVOL) 22.58% SPY 9/16/22 (47 DTE) Strike delta price theta 376P -0.15 3.12 -0.09 440C 0.15 1.97 -0.07 The above table shows that the 376 Put has a theta of -0.09.  This means the option will lose $9 a day (each contract represents 100 shares so -0.09 x 100 = -$9. To standardize, the theta/price is a ratio that can be used.  In our example  -$9/411.99 => -0.02%. Table of Theta for 15 delta Strangles for SPY, META, and IEF Information was pulled from market data on 7/31/2022 taking the initial strikes and seeing how the data changes for different upcoming Days to Expiration (DTE).  (15 delta Strangles for SPY correspond to 376P and 440C). SPY is the most active ETF for S&P 500. IEF is an ETF of 10 year Bonds. META is the ticker for the company formerly known as Facebook. Analysis 1) T...
Post a Comment
Read more

Trading Ethereum (ETH) merge? Are the CME Ethereum Options on Micro Futures markets reasonable?

Ethereum Merge Brief Background Most people are aware of Proof-of-Work (consensus mechanism to validate blocks on the blockchain - this is done with miners solving math problems (work)).  Ethereum, the second largest Crypto Currency is moving from a Proof-of-Work to Proof-of-Stake (consensus mechanism that validates blocks through a validator (like voting) system).   The main reason for doing this is to get away from miners wasting electricity solving useless math problems to a system that doesn't waste energy on miners.   One argument against moving to Proof-of-Stake, is that it becomes more about controlling a large number of validator nodes (so in a sense, the larger validators have more say, whereas Proof-Of-Work rewards are more 'fair' as it is randomly distributed. Either way you look at it being positive or negative, it is an event that can be traded as the current estimated merge date (the date the blockchain switches from Proof-of-Work to Proof-of-Stake...
Post a Comment
Read more