Last Friday, after we published our most recent market thoughts, FTX and dozens of its affiliated companies including the troubled prop trading firm Alameda Research filed for bankruptcy protection. The filing concluded one of the swiftest and sharpest downfalls in corporate history. In 7 days since the initial CoinDesk article by Ian Allison, $40B of equity value of and FTX.US was wiped out, taking along with it potentially $18B of deposits for over a million customers.

The FTX and Alameda saga has been covered in-depth by traditional media outlets and even better by the community on Twitter. Rather than rehash the blow-by-blow series of events that continues to happen in near real time, we think our value add at this point is to synthesize high-level takeaways and present a potential path forward. We don’t pretend to know everything the future may hold but given our vantage point and collective experience in operating through crypto cycles and traditional financial market dislocations, perhaps we can offer a valuable opinion. Facts will likely change and thus it is still important to be flexible about the path forward.

Bring Yourself Back Online

One of the most important things one can do in a time like this is an accurate and unbiased accounting of the present situation. Right now, FTX, Alameda, and most of their associated entities have filed for bankruptcy protection. Any entity that FTX held money on behalf of, including retail investors, OTC desks, service providers, and institutions, will likely become creditors in this bankruptcy. This also includes entities that lent money to Alameda, the largest of which was likely FTX. This means that billions of dollars invested in crypto are presently frozen, likely to take a haircut of some unknown magnitude and paid back to depositors at some unknown date. A full accounting of all the liabilities will likely take some time to produce. So far, we have heard from dozens of companies, including trading desks, VC funds, crypto projects, and lenders that have had exposure to one of the entities, but outstanding questions regarding the full extent of the damage remain unknown.