The Economy & FTX Contagion

Fed Updates

During yesterday’s Fed Minutes meeting (separate from FOMC meeting), participants noted that the labor market is still tight (more jobs than workers), but is starting to show signs of loosening. The participants also agreed on slower rate hikes that will allow the Fed to better assess progress while also stating a consensus that a 75 BPS rate hike is still necessary. The market took the Fed minutes meeting to be bullish, by focusing on the consensus of slower rate hikes; but what the market is ignoring is that the Fed participants said a 75 BPS hike is necessary and that we haven’t seen peak inflation yet. It is extremely important to note that on January 1st, 2023 the CPI formula is changing yet again, using 1 year of data to calculate inflation instead of the current 2 years. The Fed would be virtually (on paper) eliminating 2021’s inflation data from the CPI. What this means is that CPI numbers in 2023 will be lower and make current rate seem sufficient to tame inflation even if it isn’t. The one downside of this CPI formula change is that while on paper inflation would be lower, real-world inflation would still be high and running rampant. I believe that the December rate hike will likely be 75 basis points, and the next one in 2023 to be lower or even paused. By changing the CPI formula and lowering its print the Fed would most likely be able to avoid a financial crisis by not having to raise rates, but on the other hand cause runaway inflation. You can read “The Gold Bull” & “The Bitcoin Bull” Signals in your member’s area to learn how to grow your wealth in times of financial crisis & inflation.

The FTX Contagion

With FTX going belly up and filing for chapter 11, over 170 affiliated entities were forced into bankruptcy. In this section, i’m going to discuss FTX’s contagion to 3rd party companies.

  • Liquid Exchange (trading paused on November 20)
  • LedgerX (Clearing House & Exchange) – Still operational
  • Bitvo (Was supposed to be acquired by FTX, exposure unknown)
  • Voyager (Filed for Chapter 11, $3M exposure. Binance eyeing Voyager’s assets)
  • BlockFi ($400M revolving credit from FTX, unknown exposure amount to Alameda. Withdrawals halted)
  • Genesis (Unknown exposure amount to FTX/Alameda, withdrawals halted. Possible chapter 11 soon)
  • Donut (Unknown exposure amount to Genesis, withdrawals halted)
  • Gemini Earn (Unknown exposure amount to Genesis, withdrawals halted)
  • Coinhouse (Genesis counter-party, uknown exposure amount to Genesis, withdrawals halted)
  • Gopax (Genesis counter-party, unknown exposure amount to Genesis, withdrawals halted)
  • Celsius ($16.5M exposure to Alameda, Filed Chapter 11)
  • Salt (Unknown exposure amount to FTX, withdrawals halted)
  • Digital Surge (Unknown exposure amount to FTX, withdrawals halted)
  • Nestcoin ($4M exposure to FTX, laying off over 50% of staff; bankruptcy likely soon)
  • Binance ($500M exposure to FTX, written down company unaffected)
  • IKIGAI (Unknown exposure amount to FTX entities, bankruptcy likely soon)
  • Multicoin Capital (Around 10% of assets exposed to FTX)
  • Huobi (Around $18M exposure to FTX, likely unaffected)
  • Sino Capital (7 Figure exposure to FTX)
  • Galois Capital ($100M or 50% of assets exposed to FTX, uncertain future)
  • Amber (Around 10% of trading capital, uncertain future)
  • Wintermute (unknown exposure amount to FTX, uncertain future)
  • Coinbase ($15M exposure to FTX, likely unaffected)
  • LiquidMeta (Around $4M exposure to FTX, uncertain future)
  • Galaxy (Mid 8 figure exposure to FTX, uncertain future)
  • (Around $10M exposure to FTX, likely unaffected)
  • CoinShares ($30M exposure to FTX, uncertain future)
  • Silvergate (Around $1B exposure to FTX, uncertain future)
  • Chainalysis (Uknown exposure amount to FTX, likely unaffected)
  • Solana Foundation (Approximately mid-high 8 figures exposure to FTX, uncertain future)

Crypto Update

With FTX blowing up, and Bitcoin making new local lows, fear uncertainty and doubt has set over the digital asset space. While the FTX contagion is likely to continue over the next couple of weeks/months, there have never been a better buying opportunity for Bitcoin than now. The market psychology is in utter depression, there have been reports of failed/stopped suicide attempts due to the collapse of FTX which signifies a bottom. Whether you buy Bitcoin at $15k or $12K won’t matter when it reaches $100,000 a coin. Remember catching the bottom is like catching a falling knife, you’ll get hurt trying it. Be greedy when people are fearful, and be fearful when people are greedy.

Monthly Technical Analysis

You won’t stop hearing “FTX” here: as October passed by, the market tanked following the infamous FUD with BTC hitting a low of $15.5K. When these things happen, it’s natural to question where your money is going, and if it can happen to FTX, surely it can happen to another crypto firm that has custody of your funds. We’ve got a long way to go for actual mass adoption, but if you’ve checked out our resources, you know we’re getting there.

Disclaimer: Not financial advice. Please do your research before investing.

On the plus side we’re reaching the upper line of the descending broadening wedge formed over the past few days. Any support or resistance thereon will guide the next impulsive move for the market – ranging from a BTC value of $14.5k and back up to the $19k region. See our newsletters over this summer for our outlook on “the bottom”.

Expect this sideways movement for a long while though, given the slowdown of the global economy, but don’t miss out on what could be your greatest entry points ever.

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