GM. This is the Milk Road. The daily newsletter that teaches you all the best crypto moves.
We’ll have you moving like one of those inflatable-tube-dancing-things.
Here's what we got today:
FTX & Binance drama
Google is teaming up with Solana
Meme of the Day
FTX AND BINANCE DRAMA
This weekend had all the drama.
Gossip. Accusations. Twitter Fights. It felt like an episode of The Jersey Shore.
At the center of it all were CZ (CEO of Binance) and SBF (CEO of FTX).
But before we get into all the weekend drama, let me set the stage for you.
PART I – WHY THIS MATTERS
Binance and FTX are 2 of the top centralized exchanges. Last year, they made up ~30% of all trading volume on exchanges and saw a combined $27.5T in trading volume.
They’re rivals. It's Red Sox vs Yankees. Darth Vader vs Luke Skywalker. Tupac vs Biggie. Chips Ahoy vs Oreo.
PART II – THE BACKSTORY
But they weren't always so competitive. In fact, back in 2019 Binance was a strategic partner & early investor in FTX.
It was a happy marriage. Binance helped FTX. FTX helped Binance. And CZ became SBF's "Big Bro".
Then things suddenly ended. In 2021, FTX bought out Binance’s remaining shares in the company & the marriage was over.
In return, Binance received ~$2.1b from their exit. A lot of this was paid out in FTT – FTX's token (**Important for later**)
Since then Binance and FTX have become big competitors and the 2 CEOs take shots at each other whenever they get the chance.
Crypto regulation has been one of their most heated fights as of late. And recently, SBF questioned CZ's citizenship & whether he's even allowed to work with DC regulators.
@rsalame7926 @cz_binance excited to see him repping the industry in DC going forward!
uh, he is allowed to go to DC, right?
— SBF (@SBF_FTX)
Oct 30, 2022
Then, this weekend things escalated. We’re talking 0 to 100, real quick.
PART III – THE WEEKEND DRAMA
Remember how Binance got paid a bunch of FTXs tokens (FTT) when they exited their investment?
Well, yesterday CZ announced that “due to recent revelations” they were going to sell it all. (Fun fact: Binance holds 7.4% of the entire FTT supply)
The announcement sent shockwaves and within hours FTT dropped more than 10%.
So what were the “recent revelations”? Many are speculating that Alameda Research & FTX could be in financial trouble. Here are 2 reasons why…
1/ Last week CoinDesk released a report about Alameda Research's finances. It showed that 41% of Alamada’s assets are in FTT
2/ Then a guy that called the collapse of Celsius, dropped a post about how Alameda could be next. CZ “liked” it and then tweeted “Crypto is high risk.” Oh, drama!
Now, before we go any further. Let me tell you a bit about FTT.
FTT is FTXs "magic internet money" (aka its a token printed out of thin air)
The top 50 holders account for 98% of the entire supply
Alameda & FTX are the top holders and account for 75% of the entire supply
Alameda holds ~$6b worth of FTT on its balance sheet. But the current market cap for FTT is ~$3.5b. That means Alameda can't sell without crashing the FTT market (aka it's an illiquid asset)
Over the weekend, Caroline Ellison (CEO of Alameda) debunked the rumors & said there was $10b+ that wasn’t reflected in the leaked report from CoinDesk.
It helped FTT's price recover a bit, but it wasn’t enough to keep it from being the most volatile it's been all year.
So what'd Alameda do? They made CZ an offer. Alameda would buy all of the remaining FTT tokens for $22 a pop. This would help minimize the market impact of the sell-off.
Well, it doesn’t look like Binance is gonna budge and will continue to sell FTT on the free market.
Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won’t pretend to make love after divorce. We are not against anyone. But we won’t support people who lobby against other industry players behind their backs. Onwards.
— CZ 🔶 Binance (@cz_binance)
Nov 6, 2022
Many are speculating FTX & Alameda could be in more trouble because now they have to defend a big sell-off & potential bank run caused by all the FUD.
And we’re already seeing some big things happen:
FTX's stablecoin reserves just fell to a yearly low. FTX’s stablecoin reserves are down 91% in 2 weeks
FTX’s main wallet has a low balance. The wallet currently has ~$2bn in various tokens, but 55% ($1.1bn) is FTT tokens
FTX's ETH balance has dropped significantly. The balance fell by 70% over the weekend
So is FTX really in trouble? No one really knows for sure. According to SBF, "FTX is fine."
1) A competitor is trying to go after us with false rumors.
FTX is fine. Assets are fine.
— SBF (@SBF_FTX)
Nov 7, 2022
PART IV – THE MILK MAN'S TAKE
GOOGLE IS WORKING WITH SOLANA
There's a new duo in crypto.
Solana and Google Cloud.
Hey @aeyakovenko 👋
Should we tell our followers the big news?
— Google Cloud (@googlecloud)
Nov 5, 2022
Google Cloud announced they were working with Solana in 3 ways:
Google Cloud is running a Solana validator. Aka Google is a part of the Solana network by helping validate & secure the network
Google Cloud is working to bring its Blockchain Node Engine to Solana next year. This makes launching a Solana node as easy as pushing a button (literally)
Google Cloud is indexing Solana data. This will make it easier for Solana devs to access historical data
This is big for Solana because it'll make things a lot easier for devs that want to easily launch a node or access data to build new dApps.
So, how'd the markets react to the news? It was a weird one.
Within 24h, Solana jumped +15%. But has slowly been dropping since.
Now, it's down -1% from where it was before the big news.
Gotta love the markets.
TODAY'S EDITION IS BROUGHT TO YOU BY AMBIRE WALLET
I won’t lie to you, crypto wallets are tricky.
You either have to trust another company to keep custody of your seed phrase and assets, or you need to do it all by yourself.
Meet Ambire Wallet – a self-custodial smart contract wallet that gives you full control over your wallet while removing the complexity of seed phrases.
Its security meets convenience. With Ambire you can:
Register using an email & password
Pay transaction fees in stablecoins
See a transaction preview – before signing a transaction, you see a step-by-step description of what it does
Buy AND sell your crypto for Fiat directly using the wallet
Ambire Wallet is compatible with 11+ chains, comes as a browser wallet with native mobile apps, and is dropping a Chrome extension coming soon.
MEME OF THE DAY
That's a wrap for today. Stay thirsty & see ya tomorrow!
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A ROADERS REVIEW
VITALIK PIC OF THE DAY
When you see the new edition of the Milk Road just hit your inbox https://t.co/NoAoJUxKJ9
— The Milk Road (@MilkRoadDaily)
Nov 7, 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 research.