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Crypto trading and lending firm Genesis Trading and wallet provider Crypto.com are among the latest companies to distance themselves from the FTX liquidity crisis.

The two firms took to Twitter to reassure customers of their limited exposure to the events that sent the crypto industry into a frenzy earlier today.

“With regard to today’s market events, we have managed our lending book and have no material net credit exposure,” Genesis tweeted from its official company account without naming FTX by name. “In addition, Genesis has no exposure to any tokens issued by centralized exchanges.” 

Crypto.com CEO Kris Marszalek also addressed the market via Twitter, saying his company’s exposure to the situation is limited. The crypto exchange has more than 70 million users. 

“Our direct exposure to [the] FTX meltdown is immaterial: less than $10 million in our own capital [is] deposited there for customers’ trade execution,” Marszalek said. “That’s very little compared to our global revenues surpassing US$1 billion for two consecutive years.”

Earlier today, FTX founder Sam Bankman-Fried announced the bombshell that Binance plans to acquire the non-U.S.-based business FTX.com — just a few hours after The Block reported that FTX had stopped processing withdrawals. Several other heavyweight crypto firms — such as Bitpanda, Circle and Tether — have since distanced themselves from the fallout, which is likely to be far-reaching. 

BlockFi co-founder Flori Marquez said all of the company’s products were “fully operational” and clarified that the business is independent from FTX. The Block learned in June that FTX was looking to acquire BlockFi outright. Coinbase CEO Brian Armstrong also tweeted that the crypto exchange had no material exposure to FTX nor its FTT token. 

In his tweets, Crypto.com’s Marszalek added that the crypto industry must “collectively work twice as hard to rebuild the trust lost today,” and called on regulators to “strengthen and safeguard” the industry.

“We have always maintained 1:1 reserves and believe that doing so is the most basic operating principle,” Marszalek wrote. “We will push for increased transparency and regulation of the industry to ensure this is the standard by which all crypto platforms operate.”

News of FTX’s acquisition came just two days after Binance CEO Changpeng Zhao tweeted on Nov. 6 that the company would be selling off its position in FTX’s native FTT token, after what he called “recent revelations.” On Nov. 2, a CoinDesk article revealed certain details of the inner workings of Alameda Research, a crypto trading firm Bankman-Fried also owns. After Zhao’s tweet raised concerns about the health of Bankman-Fried’s businesses, he said FTX was “fine” in a since-deleted tweet on Nov. 7. FTX halted withdrawals a day later, before the deal with Binance was made public. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

FTX CEO Sam Bankman-Fried appeared to apologize to investors over a lack of communication about its financial deal with Binance in a letter to investors cited by numerous sources on Twitter.

Details of a non-binding agreement for Binance to buy FTX.com are still being hashed out, the letter said.

“I’m sorry I’ve been hard to contact the last few days,” Bankman-Fried wrote in the email, noting that protecting customers is chief among the exchange’s priorities, followed by the interests of shareholders.

“I wish I had more details for you guys right now; I don’t yet,” Bankman-Fried wrote, noting that as details are still forthcoming he is likely to be “quite swamped for the next few days” and that “Ramnik and others will be around,” referring to Ramnik Arora, head of product at FTX.

The CEO’s address to investors comes as FTX.com struggles to come to terms with the collapse of its native FTT token, and a run on the exchange that caused it to stop processing withdrawals earlier Tuesday. Binance stepped in and said it would buy FTX.com amid the token’s downturn, shocking markets and ultimately sending crypto assets overall lower.

FTT is down more than 80% since Sunday when Binance CEO Changpeng Zhao said he would sell his FTT holdings.

FTTUSD chart from TradingView.

Although a bailout from Binance may be in the works, without the terms ironed out and the deal set in stone, FTX investors may still be in a precarious position. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Jeremy Allaire, co-founder and CEO of Circle, said the FTX insolvency crisis, which has thrown the crypto market into turmoil, is the “Lehman Brothers” moment for crypto.

“Finally, as someone who’s been involved in this industry for 10 years, it is disappointing that a technology that was spawned in reaction to the Lehman Bros. moment of 2008 has given rise to its own version of the same,” he said. Lehman Brothers, of course, helped set off the 2008 global financial crisis.

Allaire said Circle’s USDC is not impacted by the crisis. It’s the largest stablecoin in the crypto markets, and any contagion that could negatively affect it would be catastrophic. But Allaire emphasized that Circle has been regulated across many parts of the world since 2014, and USDC is fully backed by government treasury bonds and cash. He went on to tweet that USDC has “detailed transparency” and is trusted by many of the top asset managers and custodians around the world.

Circle’s focus as a company is to “increase the utility value of money, and build a financial system that is more open, inclusive, transparent and accessible to all,” he tweeted.

Allaire’s comments come on the heels of the news that Binance will buy FTX.com following the collapse of its native token, FTT, which is down 80% since Binance’s CEO said Sunday that his exchange would sell its FTT token, setting the whole chaotic situation in motion.

Allaire highlighted this past bull market gave rise to value that was  “entirely speculative in nature,” and that the utility of protocols was “entirely nonexistent.” 

The current market downturn has highlighted the deep issues the crypto industry faces around transparency, counter-party visibility, and non-transparent companies holding balance sheets with speculative tokens. 

Allaire urged the industry to move on from this type of speculation into what he termed “the utility value phase,” which is dependent on having better transparency. He believes the infrastructure foundations and public blockchains for this to occur are in place.

Allaire also agreed with Coinbase CEO Brian Armstrong that the lack of regulatory guidelines in the U.S. has encouraged the rise of a risky, speculative environment that caused many companies to operate offshore. 

This created “offshore regulatory arbitrage” that gave rise to “global hydra companies” without a known location, which often avoided any repercussions for malicious acts.

Allaire wants to see accountability for these types of companies, as well as for manipulation and any anti-competitive market conduct in the crypto space.

Outside of regulation, Allaire believes on-chain identity and privacy technology are two areas that need to vastly improve to ensure decentralized finance and other on chain products grow their activity.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

At least one senator is calling on Congress to reconsider crypto legislation following Binance’s bailout of FTX earlier today.

“Market manipulation, lending activity, and whether customer funds and assets were appropriately safeguarded are just a few of the many issues my colleagues and I need to consider in the coming days,” wrote Sen. Cynthia Lummis, R-Wyo., in a statement. 

Lummis pointed to her bill with Sen. Kirsten Gillibrand, D-N.Y., as providing regulations “essential to ensuring customers are protected while still promoting responsible innovation.”

FTX’s liquidity crunch has already come to the attention of federal regulators and Congress, where a bill tightly associated with FTX CEO Sam Bankman-Fried has been a core of recent crypto legislation. The outlook for that bill is grim.

But with midterm elections tonight expected to turn out at least a Republican House of Representatives under a Democratic administration, Congress seems set for months of legislative limbo. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

What does Binance’s possible acquisition of FTX.com mean for the greater industry? For institutional clients, possibly avoiding a lengthy onboarding process. And for Binance, it could mean access to institutional clients and  a top-notch engineering team.

For FTX.com’s existing institutional clients, a buyout by Binance — including acquisition of the company’s technology and employees — could be a boon. If FTX were to fold, the institutional clients that eventually moved to Binance would need to go through a potentially drawn-out onboarding process. But rather than allow that to happen, Binance CEO Changpeng “CZ” Zhao instead pledged support for beleaguered FTX.com. A buyout of FTX.com, including access company’s technology and employees would provide Binance a means to acquire these institutional clients and avoid prolonged onboarding.

The mixture of technology and access to FTX.com’s engineering team are among factors that Steven Zheng, a researcher at The Block, said support Binance’s motivations to purchase its competition. “The political points of not letting a massive exchange like FTX fail is also a good add-on. FTX is historically the second- to third- largest exchange by volume. The acquisition of FTX would push Binance’s market share to over 80%,” Zheng said.

So, for CZ, although the implosion of FTX.com would see a serious competitor put out of commission, there may also be real benefits to stepping up and buying the company out.

Binance did not immediately respond to The Block’s request for comment.

Still, Binance’s letter of intent is not an absolute, and should Binance choose to renege, FTX.com will be forced to plug a nearly $3 billion hole. “If Binance backs out, I don’t think FTX can do much except paying out only a fraction of what their customers deposited,” said Zheng.

On whether or not Binance may go through with the deal, CEO of Coinbase Brian Armstrong is said to have commented that there are a number of reasons why it might not make sense, although he added he was not at liberty to share why. “It’ll probably come out eventually,” Armstrong is quoted as saying on Twitter, adding that “it may be a bad situation if this deal doesn’t go through for the customers involved.”

FTT’s falling price previously prompted Armstrong to release a statement saying Coinbase is not materially exposed to FTX or FTT.

Not included in the proposed acquisition is FTX’s U.S.-facing marketplace, hosted on FTX.us, nor Binance.us, which founder of FTX Sam Bankman-Fried noted are both completely separate entities. And although withdrawals appeared earlier to grind to a halt on FTX.com, SBF maintained that for the FTX.us, “withdrawals are and have been live” and that it “is fully backed 1:1, and operating normally.”

The sharp collapse of FTT, FTX.com’s native token, coincided with a general market downturn as traders reacted to the news of the potential purchase by Binance.

Aside from that, industry insiders declared dead a bill that SBF sunk millions into via lobbying and political donations, after news spread that the exchange would be sold.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Binance CEO Changpeng “CZ” Zhao shared what he said were two big lessons after confirming earlier in the day that FTX had agreed to sell its non-U.S. assets to the rival exchange amid a liquidity crunch. 

“Never use a token you created as collateral,” he wrote on Twitter. “Don’t borrow if you run a crypto business. Don’t use capital ‘efficiently.’ Have a large reserve.”

He said that Binance had never used its BNB token for collateral and has never taken on debt. The news earlier in the day triggered a broad selloff in crypto markets, as traders worried about broader contagion. 

“Stay #SAFU,” he said, referring to a term used by crypto enthusiasts to denote that “funds are safe.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Beleaguered Meta CEO Mark Zuckerberg told hundreds of executives that plans to lay off employees would begin tomorrow, according to The Wall Street Journal, which cited people familiar with the matter. 

Zuckerberg laid the blame at his own feet, telling executives he was responsible for the company’s missteps and its overstaffing, the report said.

A couple of days ago, The Wall Street Journal said the tech giant intended to let go of thousands of staff members. At the end of September, Meta — which owns two of the world’s most popular social media companies, Facebook and Instagram — reported it had 87,000 employees. 

The CEO has been widely criticized for his decision to invest billions of dollars in the metaverse. So far this year Meta’s metaverse division has lost nearly $10 billion.  

The reduction in headcount, perhaps the largest round of layoffs in Meta’s nearly two-decade existence, follows a September hiring freeze. Meta has said it wanted to trim costs by 10%. 

Meta is far from alone in its struggles. Other firms focused on the metaverse including Bitmex, Dapper Labs and Mythical Games have also laid off staff this month. Additionally, more traditional tech companies, like social media platforms Twitter and Snap, have announced layoffs amid slowed growth.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Most bitcoin mining stocks tracked by The Block declined on Tuesday after news that crypto exchange Binance will acquire FTX rocked the markets.

According to data from TradingView, Bitcoin was trading at around $18,200 by market close, up slightly from a daytime low of $17,500.

BTCUSD Chart by TradingView

Core Scientific fell 15.61%, followed by Hut8 US (12.44%) and Hut8 Canada (12.12%). Digihost’s share price also experienced significant declines (10.88%), as did BIT Mining (10.56%).

Here’s how crypto mining companies performed on Tuesday, Nov. 8:

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• In this weekly series, we dive into some of the most interesting data and developments across the Layer 1 blockchain landscape, from DeFi and bridges to network activity and funding
• The Avalanche ecosystem quickly rose to prominence in 2021 amidst growing concerns over scalability of the Ethereum network
• Avalanche subnets represent the network’s long-term strategy for scaling and initially reduced congestion on the Avalanche C-Chain, but activity on the primary network has remained muted since mid-2022
• A recent update to the Avalanche network has relaxed the capital requirements to becoming a subnet validator and enabled basic communication between subnet VMs, taking a step toward greater scaling functionality for subnets in the future

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Quick Take

• Reported earnings November 7, 2022 and closed at $5.75 per share 
• Mining cost as a percentage of sales doubled increased from 39.0% to 66.5% QoQ
• Aggregate revenues fell 36.5% to $46.3mm from $72.9,mm QoQ 
• Raised $298.4mn in ATM Offering at a weighted average price of $8.23 per share, a ~30% dislocation from current trading prices

This research piece is available exclusively to
members of The Block Research.
You can continue reading
this Research content on The Block Research.