Why? FTX’s biggest asset as of Thursday was $2.2bn worth of a cryptocurrency called Serum. Serum’s total market value was $88m on Sat, acc to CryptoCompare. Personally I doubt 10cent on $ will be returned to creditors in some years.
Bankman-Fried personally seems to own shares in Robinhood.
Some value there to be recovered for FTX creditors in a lengthy court process but by now it’s obvious the guy used FTX funds to finance his personal holdings.
Given how young this unregulated space is: (a) assume more „FTX issues“ to come to light soon; (b) expect most retailers wanting to liquidate their coins (if they even can) to buy safe $ bills 💵 (oh the irony); which (c) pushes all coins (much) lower in coming weeks.
If an exchange goes bust, its users’ „digital assets“ (funny name I know) will go into the bankruptcy estate that lawyers & advisors divvy up: Creditor rankings for payouts means „customers“ come last. Watch & learn with laser eyes…!
The only thing that matters for any asset when trust vanishes is liquidity. For an exchange however, it always was the only thing that mattered. An exchange going bust & lawyers taking over for years is the mother of “self-feeding” coin value destructions.
In a bankruptcy process, the administrator is by definition a destress seller which makes it hard to recover fair value even for the best trophy assets.
Now take a look at the asset & liability table of FTX…
The list divided assets into liquid, less liquid & illiquid.
SRM (Serum) is the largest single asset at $2.2bn valued. We don’t have ownership no but SRM is distressed (-27% as I write this) with a total market cap of $67m for 100% of tokens. Assume nil value!
Again, we don’t know how many Alameda owned but at least there seems a $5bn market cap left, although that is falling quickly…I suspect some value is recoverable here but never the quoted $900m. Perhaps $50-100m ?
Next: FTT was FTX/Alameda’s own token: a zero buy definition - not $550m - although the market hasn’t fully priced that yet (market cap still $230m for 100% tokens).
Pre-2020, Gold had one marginal buyer, that being gold-backed ETFs.
Today, gold has at least 3 marginal buyers that can overlap or alternate each other. They are:
- Gold backed Western ETFs (which buy, sell or hold based on US real rates);
- Central Banks seeking higher gold reserves (China; India; Thailand; Vietnam; Qatar, KSA or even Poland) for geopolitical & other reasons;
- Chinese & other Asian wholesale or retail market participants and professional speculators;
Who bought most last? India!
Why? The government cut import duties on gold by 9% at end of July, triggering a renewed surge in demand. “The impact of the duty cut was unprecedented, it was incredible,” said Philip Newman, managing director of Metals Focus in London. “It really brought consumers in.”
At least for now, there seems to be always somebody.
1/n
Note however that Chinese retail buying has slowed down recently, as best illustrated by the Shanghai gold premium over international prices.
I will elaborate on the Chinese retail clients more soon.
2/n
However, professional Chinese speculators have increased their futures positions somewhat again. Who is the better indicator of what comes next, retail or the pros? IDK
In 2023, I said I will tweet less about oil and I will stick to this promise but today I make an exception and will break the promise as we enter a period of more volatility for oil...
So let's talk about OPEC and Saudi market share. It's decision making time.
The Saudis decided to keep oil from falling <$75 for 2y by cutting overproportionally in their OPEC+ quota context.
They have cap for 12mbpd but produce 9mbpd. It was 10.5mbpd in 2022. Pick a number but they are 15-20% below their fair share.
2/n
Why did they do so?
Likely because of bad advisers. There is a whole crew of supply gloomers out there charging clients money to claim the Permian or US shale is about to roll over.
Let me share some real time data on the EU natgas market that are hard to get.
European gas consumption for 28 countries matches last's years to the cubic meter (Oct 2022 - Oct 2023 = Year 2022).
However, consumption remains 17% below 2019/20 season.
Is there a supply issue? Rubbish. The global LNG market is oversupplied from every corner; EU storages will be filled by end of Aug where we sit. We have too much gas.
#TTF 1/4 (in mcm/day and YTD)
Three factors matter why there is less consumption vs 2019/20 season:
1) Milder weather: 70% of total consumption is temperature related. Temperatures are milder, thus Europe consumes 14% less vs 2019/20.
Is that permenant? It sure looks like a trend where I sit. But climate scientists can answer that best.
Households Consumption; 2/4
2) Less power generation: Europe replaces more and more natgas in the grid with solar & wind and in the case of France with better capacity utilisation of its nuclear fleet. That adds up...!
India likes a "GOOD" deal - also in crude oil - and is about to teach Russia a lesson what that means.
Spoiler 1: it's not a pretty one!
Spoiler 2: China & Turkey will learn quickly..!
Let's look at the Indian-Russo crude oil bromance.
1/x Thread
Before the invasion in Feb 2022, Russia exported some 2.8mbpd (55%) of its 5.5mbpd crude to Europe by way of pipeline (Druzhba) & sea transportation (seaborne).
But not just crude oil...
2/x
Russia also sold products such as diesel or jet to Europe for a total of 1.4mbpd in petroleum product exports.
In other worlds, G7 sanctioned as introduced in Dec 2022 required 4.2+mbpd of crude & products to be re-shuffeled in globally. Big numbers!
For now, Red Sea disruptions due to Houthi attacking commercial vessels randomly remains a ton-mile story, not a crude oil story.
Within different shipping segments the picture of diverting cargo around the Suez Canal remains a Container Vessel story, to a less extent also a Product Tanker & Crude Oil tanker story.
Container Vessels owners have been the most consequent in diverting cargo.
Since Nov, the number of container vessels crossing the Suez Canal has collapsed by 80% in both directions.
2/n
Crude Oil tankers from the Middle East (Saudi Arabia; UAE; Iraq; Kuwait; Qatar or Oman) to Europe are also lower but our high frequency data does not yet show a similar collapse.
It also nicely illustrates how changing Russian crude flows (Urals diverted to India & China and away from Europe) have increased traffic through the Suez Canal - good for Egypt as Russian dark fleet vessels will or cannot seek an alternative route to ship oil from the Baltics to India.