Weekly Interest Rate Roundup: Nov 1

This is the craziest day I've ever seen in crypto. I still can't get my head around what happened. In less than a week, deca-billionaire SBF went from crypto's warrior king and DC golden boy to... God knows what he is now. Criminal? Pauper? One thing's for sure, he ain't going to be negotiating crypto regulation on behalf of the industry anymore. It will probably take all he's got just to keep himself out of jail.

For those of you who haven't been glued to crypto twitter today, FTX paused withdrawals this morning amid insolvency rumors surrounding FTX/Alameda. Shortly thereafter, SBF declared that he would be selling FTX to CZ, his number one rival and the very man who put him in this position.

Just days earlier, CZ publicly and loudly announced his concerns regarding FTX's financial position and declared that he would dump his entire stake in FTT. At the time, that stake was worth billions of dollars. Today it's worth 73% less. Turns out that crash in the price of FTT was a big problem for FTX and Alameda - apparently they had borrowed massive amounts of money against their FTT holdings and were now getting those loans called back.

And it couldn't have come at a worse time - CZ managed to stoke enough public fear about FTX's solvency to spark a run on deposits. Over $6 Billion has been withdrawn from FTX in the last three days. Not a great time to have your debts called in.

Frankly, it's all still a bit hazy. I don't know what exactly happened, and apparently neither does anyone else besides SBF himself and maybe his inner circle. If there's any demonstration of why unregulated CeFi institutions can't be trusted, this is it.

To be honest, unlike the events earlier this year, this one took me completely by surprise. Luna was a clownshow. That community was obnoxious and toxic, and their detonation was foreseeable. But SBF wasn't like that. I never liked the guy, but I always thought he was smart and ruthlessly competent. I'm not surprised by his apparent lack of scruples, I'm surprised that he lost.

Who knows what happens to crypto lending markets now. Alameda was the biggest borrower in the market by far. I think this might be the deathblow for CeFi crypto lending. We'll just have to see who halts withdrawals next.

Teddy