#11-14 | FTX AFTERMATH, $SPX $SPY $ES_F GAMEPLAN & LEVELS, DARK POOLS POSITIONING,
How much does this crypto margin call contagion spill over to equities...
We tend not to have things likeee… stop lossses… I think that is not necessarily a great risk management tool.
Let me think of a trade where I lost tons of money… Umm… Well Idk I don’t want to go into specifics too much into that…
Caroline Ellison, CEO of Alameda Research (FTX’s Market Maker)
There is no doubt that venture funds and investors failed to perform the necessary due diligence on unicorn stage companies.
Good times create weak men, bad times create strong men
This quote is a reflection on the effort by venture institutions when interest rates were near 0 and the cost of capital was essentially free.
This stems from the lack of clarity between regulators' views on commodities and the security of cryptocurrencies. The United States forces these emerging industry players to relocate offshore. SFB implemented a two-tiered structure consisting of FTX, the exchange, and Alameda Research, the market maker.
Several months ago, Luna, Terra protocol crashed, resulting in the bankruptcy of Celsius, Voyager, Three Arrows Capital, and BlockFi. It was discovered that Alameda Research had exposure to the market and was incurring significant losses. Instead of booking the loss, SFB is beginning the process of redeployment.
SFB devised a strategy to resolve this problem, which involved making a loan between the companies utilizing customer deposits 1:1 funds which had been in FTX and leveraging them at Alameda Research. As a result of these funds, he attempted to bail out Celsius, Voyager, Three Arrows Capital, and BlockFi, and had Alameda trade its way out of trouble.
FTX and all its assets were wiped out as a result of this scheme. A cash shortfall of $8 billion forced SBF to file for bankruptcy.
The contagion is already spilling over into institutional investors such as: NEA, IVP, Iconiq Capital, Third Point Ventures, Tiger Global, Ontario Teachers Pension Fund, Altimeter Capital Management, Lux Capital, Mayfield, Insight Partners, Sequoia Capital, SoftBank, Lightspeed Venture Partners, Ribbit Capital, Temasek Holdings, BlackRock and Thoma Bravo.
FTX had $900 million in liquid assets against $9 billion in customer assets
FTX had $2.2 billion in a cryptocurrency called Serum, which has a current market value of $84 million, the largest asset on the balance sheet.
FTX list no Bitcoin assets despite the fact that it has BTC liabilities of $1.4 billion
It is reported that a hacker (SFB) booked over $600 million over the weekend, consuming every last dollar left. The investigation is still ongoing. SBF had then been revealed to have built a backdoor into the FTX accounting software that allowed him to move billions of dollars out without triggering any audits by other staff.
In many cases, investors have written their investments down to 0 and taken them to bankruptcy court. Under "E-MINI S&P500 Future", we will analyze possible consequences if contingency does create volatility for equity markets.
The collapse of FTX started when SBF decided to use customer deposits to cover operating expenses. This was breaking the law. After Binance realized that the $FTT tokens that FTX issued were backed by customer deposits, they started a sell program to test their liquidity. FTX started experiencing liquidity issues as a result of this event, where customer deposits weren't enough and margin calls started triggering trader stops.
Hi, regulators? Fraud is calling…
It is unclear who oversees all of this and how the SEC protects the interests of retail and institutional investors. In the crypto industry, there are still no clear distinctions between what constitutes a crypto commondity regulated by the CFTC, and what constitutes a crypto security regulated by the SEC.
According to SEC comments this weekend, SEC Chair Gary Gensler discussed possible no action relief with FTX on 4/29/22.
Read the SEC public statement on No-Action Relief below:
People aren't interested in what you know, they're interested in who you know. An unconfirmed connection has been made between Alameda CEO's father Glenn Ellison, who is the Professor of Economics; Department Head at M.I.T., and possibly the former boss of Gary Genslery, Chairman of the SEC. Take a look at this thread to learn more about the possible elite connections between FTX and politicians and the favors they exchange.
On a side note, this is no joke. Former Enron CEO John Jay Ray III has taken over as CEO of crypto exchange FTX, the company he helped lead through bankruptcy and a slew of settlements after the energy giant went bankrupt in the early-mid 2000s.
According to Crypto.com's CEO, less than $10 million of funds have been exposed in FTX over the past few hours. Nearly 90,000 unique transactions have been processed on Crypto.com over the last couple of hours, indicating that users are scrambling to withdraw funds. At the moment there are ticking time bombs everywhere in the #crypto space. Over the weekend, Crypto.com accidentally sent $400 million worth of users' $ETH to a wrong address.
These bombs will start to explode in the coming weeks. FTX had their hands in a lot of the crypto ecosystem. We will keep an eye on the corrleation to crypto margin calls and high beta equities.
With the kiss of death, Jim Cramer Inverse ETF hits another home run…
$BTC Enter Price Discovery
This past 2 years of exuberance in Bitcoin became a product of the Federal Reserve keeping interest rates near 0 throughout 2020-2022.
See chart below: YELLOW LINE=FEDFUNDS RATE
$BTC has to enter a phase of price discovery at much lower levels in the upcoming months-years. This phase has to be met with real progress among companies, DAOs, regulators, institutions, and retail.
The artificial supply that was mined with leverage needs to find a new home. “Bitcoin Whales” / Large Size Traders who could act as a Wholesale Market Maker needs BTC to stabilized in order for progression to be made to gain back institutional investors.
The problem is that Satoshi failed to hard code in mechanisms to manage leverage inputted into the network, or he did not understand the level of greed and abuse that exists in human society. It is not hackable, but is still exploitable.
There is no way to predict the future for institutional investors who have exposure to both equities and crypto, as well as the amount of leverage they have in the crypto space. It is possible we may see a flush to 10380 by next weekend if there are no bids on BTC. In my opinion, BTC trades as a high beta asset, so investors tend to be more futuristic and stick with the same theme in equities.
The upcoming theme for the next 10 years;
Where professionals returns
Where respect is earned
Where returns of proven
E-MINI S&P500 Futures
To recap last week, the bulls made good progress by establishing a potential new long term trend between the GREEN CHANNEL that we identified in #11-11.
This week for bulls to continue this momentum, they need to start becoming aggressive and running the shorts upper stops.
A break above this GREEN channel will take you to 4075.75, 4147.75
Last week our Shorter Time Frame targets were over 3970-3980 > 3998, 4000, last weeks high is: 4009.75
The BLUE RANGE, which was identified last week, has been successfully held by net longs. Size must build out above 3978.75 in order for net longs to remain in control. After net longs and bulls hold that level, upper stops could now be taken at 3996.50, 3997.75, 3999.25 from large size traders spending the expense to create that liquidity higher. Wholesale needs to keep rebalancing their initial position to the upside with bids supporting above 3978.75
LIS: 3989
In the event that shorts become more aggressive at these upper levels, and bulls fail to repair over 3989, the T2 Range between 3870.25 and 3967 may be retested. Market Makers may induce an inventory correction to test the liquidity in that range of 7.7% CPI beat. The prints from that range created massive short positions. Net longs added to the pressure. Before making the next move upward over 4057, leveraged traders should see if they can defend the T2 Range.
Defending the Previous Day Low (Friday) will be the last line of defence for bulls. Failure to defend this level will open the door for the last short position in the BLUE RANGE to be filled in.
See chart below: YELLOW ARROWS > Top: Previous Low, Bottom: Last Short Position for CPI print before the MASSIVE squeeze
If there were to be more catalysts to fund net short positions, we would need to see the LOWER CHANNEL to act as support level around 3756.
See GREEN RANGE for reference
It's a busy week with economic data. We received some important #inflation data on Monday. The release of the inflation expectation for the next 1 and 5 years. This data shows where inflation expectations are in the next 1 and 5 years.
A major problem for the Fed is if this data is too far off and inflation in 5 years is higher than expected. T In order to reduce future inflation expectations, the Fed will raise interest rates more aggressively and tighten quantitatively.
As PPI is released on Tuesday, the market is looking for better results than CPI in order to sustain this rally higher. If both numbers support CPI coming in light, we can see a move higher into 4043.25.
Dark Pools
Our process involves analyzing the dark pool prints that stand out to us and fit the price action story for each ticker. Dark Pool levels may or may not serve as future support and resistance. By tracking the notational of these prints, we are able to gain an understanding of where Large Size Traders / Institutions are positioned.
AAPL: 137.18 ($137mln), 140.26 ($516mln)
MSFT: 243.44 ($508mln)
TSLA: 185.85 ($110mln), 192.36 ($96mln), 197.75 ($155mln)
GOOGL: 86.15 ($107mln), 87.95 ($131mln), 89.16( $200mln)
AMZN: 90.60 ($289mln), 90.85 ($290mln), 91.04 ($100mln), 95.80 ($105mln)
META: 90.50 ($108mln), 114.52 ($100mln)
XOM: 110.55 ($182mln), 113.04 ($154mln)
LAD: 225.21 ($164mln)
WBD: 9.70 ($106mln)
