GM. This is the Milk Road. The daily newsletter that comes back from a holiday weekend with more energy than a bottle of Mountain Dew Blue Voltage.
The Milk Man hasn't taken this much vacation since that epic spring break trip to Cabo.
What happens in Cabo, stays in Cabo.
Before we dive in, let's take a quick look at what happened in the markets:
- Bitcoin down 2.3%
- ETH down 1.7%
- My weight up 5% (and counting)
Now, let's dive in to the 2 things that caught our eye over the break:
- Miami night clubs mourn the loss of crypto nerds
- FTX invested in a 3 person bank
- Milky Memes
MIAMI NIGHT CLUBS MOURN THE LOSS OF CRYPTO NERDS
Everyone has a different bear market indicator:
- Some people look at inverted yield curves
- My finance professor watches money rotating from growth stocks to consumer staples
- The smartest investors ask strippers
How does the Milk Road determine if we're in a bear market?
By the lack of sparklers being lit at Miami's hottest nightclubs.
The Financial Times released a story over the weekend about Miami night clubs being in a bear market of their own.
Popular night club E11even went from processing more than $500k of crypto transactions/mo in 2021, to less than $3k/mo in 2022.
“It was revenge of the nerds,” a local real estate agent said. And oh boy was it ever.
They even got 50 Cent to perform, and The Crypto Nerds spent more than $1m on the night.
Alas, all good things must come to an end.
While some people think the crypto bros will never come back, others like Alan Roth, of Rosa Sky rooftop lounge said:
“I don’t think the crypto market is going to fold and be done. It’s like the regular market — it goes up and down. I don’t get the sense that they’re afraid.”
Hey Alan, the Milk Road agrees and we ain't afraid.
FTX INVESTED IN A 3 PERSON BANK IN WASHINGTON
FTX invested $11.5m in a bank so small that it makes my uncle's plumbing company in Ohio look like Goldman Sachs.
Before we dive into what we know and why FTX did this, how annoying did FTX make Thanksgiving?
All I heard from grandma was:
"What happened to that FTX company? I told you that crypto thing was a scam!"
Thank Satoshi that's over.
Then, over the weekend we found out that FTX invested into Farmington State Bank in rural Washington. Another head scratcher.
Here's what we know:
- The bank was the 26th smallest in the USA
- It only had 3 employees
- FTX invested $11.5m to own 10% of the bank. Thus valuing a bank with only $10m in deposits at over $100m (wtf?)
- Their headquarters legit makes my uncle's plumbing HQ look like the Ritz Carlton
But here's what we don't know....why would FTX invest in a tiny, random bank in the middle of nowhere? We have two guesses:
1/ Licensing:
Today, every Neobank is built on top of an existing bank. AKA they make a better user interface on top of that old bank you've been going to for decades.
Maybe FTX was trying to do the same thing and invested in Farmington to speed up the process and avoid normal hurdles?
2/ Laundering: FTX was using Farmington for some kind of shady money laundering scheme.
Before the investment, Farmington's deposits hovered around $10 million.
But in the third quarter this year, the bank’s deposits jumped nearly 600% to $84 million. And, $71 million of those deposits came from just four new accounts.
Farmington also has ties to Tether/Bitfinex and their parent company, Deltec, is based in the Bahamas.
The Milk Man is on red alert.
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MILKY MEMES
Imagine going back to Nov 2021 and telling people that in 1 year: -Celsius and BlockFi are bankrupt -Terra collapsed and Do Kwon is an international fugitive -3AC went under -SBF ran off with everyone's money and Bitboy assembled a team to fly to the Bahamas to demand answers
— Patrick | Dynamo DeFi (@Dynamo_Patrick)2:42 PM • Nov 27, 2022
Welcome to the afterlife, BlockFi
— Dr. Parik Patel, BA, CFA, ACCA Esq. (@ParikPatelCFA)3:40 PM • Nov 28, 2022
That's a wrap for today. Stay thirsty & see ya tomorrow!
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A ROADERS REVIEW
VITALIK PIC OF THE DAY
You used to just show up to an ETH meetup and meet Vitalik That's like organizing a Twitter meetup and running into Jack Dorsey
— The Milk Road (@MilkRoadDaily)3:57 PM • Nov 28, 2022
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own researchBut
