The mindblowing collapse of FTX-linked stocks 🤯; Global venture funding is in freefall 🌪; Do virtual words need virtual landlords? Decentraland thinks so 👀
FinTech is Eating the World, 13 December
Hey Everyone,
Happy Tuesday! Today’s issue is crazy hot as we’re going to look at the mindblowing collapse of FTX-linked stocks (the contagion continues!), global venture funding which is in freefall (+ some resources on what can you do to still win), and question whether virtual words need virtual landlords (Decentraland thinks so 🤷♂️). Let’s just jump straight into the incredible stuff:
The mindblowing collapse of FTX-linked stocks 🤯
Following the money 💸 The sun was just beginning to rise again when the new reports started to emerge. The contagion continues 😷
I have written quite a few times about how big FTX’s tentacles are 🦑 In addition to hundreds of startups and some of the most prominent crypto firms, they apparently got to stocks too. FTX-linked stocks, which had been on a seemingly unstoppable rise, are now collapsing in a mindblowing display of market turbulence.
One by one 👀 The elephant in the room - Silvergate Bank SI 0.00%↑. The largest crypto bank in the US and one of the few allowing customers to move fiat currencies onto crypto exchanges, has lost a whopping 60% of its value since the start of November, according to Kaiko. For the perspective, earlier this year, Silvergate managed more than $16B in assets (up from less than $1B in 2019, so 16X growth 😳).
In case you missed it, Silvergate was accepting FTX and Alameda deposits and processing wire transfers for companies and individuals to the exchange. It was heavily criticized for that, and now it seems that the market is punished it badly.
As you can see from the above graph, Galaxy Digital and CoinShares, which both had a multi-million exposure to the fallen exchange, are also down quite a bit (35% to be exact). Yet, they have seen their share prices stabilize in December while Silvergate is still in freefall. Ouch 🤕
Zooming out 🔎 But it’s not only the companies that had a direct or close relationship with a fallen FTX that are suffering. In essence, pretty much every public company that has exposure to cryptocurrency is down, and often down badly. Examples here could be the regulated lenders with ties to the crypto industry such as Provident Bancorp PVBC 0.00%↑ and Signature Bank SBNY 0.00%↑. They recently announced losses and plans to significantly reduce their crypto exposure.
This isn’t surprising at all given both banks are down around 60% in the public markets. For the perspective, that’s 2-4X more than traditional, old-school banks (though, even they have some exposure to crypto i.e. JPMorgan JPM 0.00%↑). That tells you a lot.
✈️ THE TAKEAWAY
So what does this mean? 🤔 First and foremost, we already know that FTX's sudden collapse presents a larger reputational problem for crypto. Then there’s also a crypto contagion risk stemming from the meltdown (that’s already happening though on a somewhat small scale now). More importantly, as you can see from the above-presented cases, FTX has clearly sent shockwaves through the traditional financial world too, especially those with direct exposure to crypto. Billions of dollars had been wiped out in a matter of days and months. The worst part? The situation might only worsen before it gets better.
Bonus: The FTX story just keeps getting crazier 😳
In case you missed it: The FTX story is getting wilder and wilder 🤯
FTX is much worse than anyone imagined 🤯🤯🤯
The aftermath of the FTX collapse could be bigger than the earthquake 🌋
Contagion of contagion, or how Genesis could cause Crypto Armageddon 😳