1/ #SBF might have ignited the FINAL death spiral

🧵A thread on why an #FTX bankruptcy is the #Lehman of #DeFi

#CZBinance #FTT #SamBankman #BlockFi #DeFi Image
2/ With $2+bn raised, support from virtually every tier 1 fund, a $32bn valuation, 1.2m wallets & $10bn in deposits, #FTX was 2nd to none other than the man that triggered their bank run - #CZ's #Binance.
3/ As @FTX_Official files for bankruptcy, what's left are 100K+ creditors, $10+bn in liabilities, and... a new high score on a certain graph Image
4/ A few notable tier 1 funds that backed #FTX include:


In other words: THIS is size (simplified it for you, @stablekwon)
5/ But that's not the half of it

As an exchange, not only has money been thrown at it like it's a magic cloning machine

but much more is kept in it by users

#SBF used this money to fund #Alameda

& it can't be withdrawn anymore
6/ A number of big players in #crypto have/had their treasuries in FTX

#Multicoin being one of them - to the tune of 10% of their AUM
7/ This was made public as #Multicoin had informed their LPs of the situation, as most funds are likely doing

No need to panic or fasten your seatbelts - it's already too late

The death spiral has begun
8/ #Multicoin and many other VCs are open-ended investment funds. Simply put, LPs can withdraw their full investment at any time.

Now, #SBF's actions have left many funds without the liquidity to honor redemptions.

What happens next?
9/ The flywheel reverses

2 things happen when LPs withdraw their money from funds

1. Massive sell-offs that will crash the #crypto market

2. Funds cannot support projects to #BUIDL & grow the industry Image
10/ 1. Market collapse

Funds without the money will need to liquidate their most liquid assets (likely crypto) to pay LPs.

With the #FTX contagion, there seems to be a number who may need to go this route
11/ To maintain existing positions & thresholds, many funds will need to liquidate assets regardless of their exposure size or P&L

This will cause a huge market sell-off with no regard for prices

When your house is on fire, you grab what you can & run
12/ If you're wondering what might happen if these sell-offs happen

Here's a great tweet that may give you an idea if #Alameda ALONE dumps their assets.

You might want to sit down for this one.
13/ #FTX has burst into flames, locking everything inside.

There is currently no transparency on what is happening with locked users' funds

This has led to #BlockFi to pause withdrawals & hire a bankruptcy lawyer.
14/ Doesn't sound very trustworthy to me.

It especially won't to the old money providing liquidity to these funds either.

Which leads me into the second thing.
15/ 2. No funds to #BUIDL

By liquidating their crypto portfolios to honor redemptions of angry and doubtful LPs

Funds can no longer support new projects #BUIDLing the space, or even go insolvent
16/ Not only will new projects not be able to #BUIDL

VCs still have their hands in existing investments & are core to their development.

Projects are reliant on their funds, guidance, network, & more.

Here are some affected projects, likely more to come
17/ With #LUNA wiping out $40 billion of its own value and an estimated $300 billion across the entire #crypto market just 6 months ago

It's hard for investors to trust the market again.
18/ #Crypto exists because of the people #BUIDLing in this space - all day, every day

This can't be possible unless there is money flowing in & paying for their work

In all seriousness;

#LUNA wasn't size - #FTX is.

Brace yourselves,

it will be colder than May.
19/ To everyone hurt by this absolute disaster caused by greed;

It's not your fault

Take your time & recover

You'll come out stronger

We all will.
20/ If you have funds stuck in #FTX, take a read at this great thread by @1chioku. He might be able to help.

NOT financial advice
21/ If you enjoyed what I’ve written, pls give it a like and RT.

Note: This is just my opinion and is not representative of what will happen
22/ Lastly, several people have posted great insight & information about the #FTX insolvency. I encourage everyone to read as much as possible to stay informed.


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