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The FTX Contagion Spreads

The most expensive Thanksgiving ever … fun Turkey Day stats … more dominoes falling in the crypto sector … FTX was Sam Bankman-Fried’s “personal fiefdom”
Before we jump into today’s Digest&nbsp…

The most expensive Thanksgiving ever … fun Turkey Day stats … more dominoes falling in the crypto sector … FTX was Sam Bankman-Fried’s “personal fiefdom”

Before we jump into today’s Digest a quick note…

Our InvestorPlace offices are closed tomorrow and Friday for Thanksgiving.

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If you need help from our Customer Service team, they will be glad to assist you on Monday when our offices reopen.

Given the market holiday, we’ll also be taking tomorrow off here at the Digest. But we’ll pick back up with you on Friday.

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From all of us here at InvestorPlace, have a wonderful Thanksgiving!

Moving on to today’s Digest

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Get ready for the most expensive Thanksgiving ever

Your Turkey Day meal with all the trimmings will run you roughly 20% more this year.

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Last year’s holiday meal cost an average of $53.31. This year, the price tag ramps up to $64.05.

While your turkey itself will cost about 21% more, it won’t be the most expensive item relative to last year. For that, we look to stuffing.

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A 14-ounce bag of cubed stuffing mix is up an eye-watering 69% from 2021.

Now, we’ll have some fun with Thanksgiving weekend shopping statistics in our Friday Digest, but here’s a quick Thanksgiving-meal-related quiz for your amusement.

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How much will Americans spend on turkeys alone this Thanksgiving?

$835 million.

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That reflects roughly 46 million turkeys on the Thanksgiving table.

Next, what’s the estimated cost of the property loss damage caused by Thanksgiving fires?

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Nearly $26 million.

(I would love to see what percentage of that comes from Thanksgiving chefs experimenting with deep-frying their turkeys.)

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Finally, what length of time would the average American male need to spend on a treadmill to burn off the number of calories consumed at the average Thanksgiving meal?

Ready?

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Nine hours and 27 minutes.

That’s based on the average consumption of roughly 4,500 calories at Thanksgiving dinner.

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Fantastic work, gentlemen. Unbuckle that belt.

Moving on, the turmoil in crypto isn’t over yet

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All eyes are on Genesis, the troubled crypto brokerage that suspended customer withdrawals last week following the FTX implosion.

The latest rumbling is the company may have to declare bankruptcy.

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From Bloomberg:

Digital-asset brokerage Genesis is struggling to raise fresh cash for its lending unit, and it’s warning potential investors that it may need to file for bankruptcy if its efforts fail, according to people with knowledge of the matter.

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Genesis has spent the past several days seeking at least $1 billion in fresh capital, said the people, who asked not to be identified because discussions are private.

That included talks over a potential investment from crypto exchange Binance, they said, but funding so far has failed to materialize.

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As it relates to everyday crypto investors, Genesis has suspended withdrawals from its product called “Earn.” According to inside sources, roughly $700 million of client funds are unavailable for withdrawal.

This isn’t the end of crypto, but it marks a tectonic shift for the sector that investors need to consider thoughtfully

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Two things can be true at once…

One, the strongest cryptocurrencies that provide true value-add benefit for their communities and their investors can survive this.

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Two, the string of crypto blowups this year – from Terra, to Three Arrows, to FTX, to whatever is coming next – has destroyed trust for many crypto investors. Unfortunately, this will set the sector back by years.

From Su Zhu, the founder of Three Arrows Capital:

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Some industry leaders have said the FTX collapse set the industry back by five years. I think it’s even longer than that — seven or eight years — maybe even longer, if the underlying issues aren’t solved.

The setback comes as investors now grapple with an existential question…

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Whereas it used to be “which crypto will give me the best return on my money?” the more immediate question is “which crypto will simply return my money?”

This destruction of trust is corrosive to sector growth.

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In the midst of this, rumors are swirling around Digital Currency Group (DCG), which owns Genesis

This is a big deal because DCG also owns Grayscale Investments, which manages the world’s latest crypto fund, Grayscale Bitcoin Trust (GBTC). Grayscale owns more than 3% of the world’s bitcoin.

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There’s speculation as to whether DCG and Grayscale are exposed to FTX/Genesis contagion. This comes after Grayscale wrote in a statement that it won’t share proof of its bitcoin reserves:

Due to security concerns, we do not make such on-chain wallet information and confirmation data publicly available through a cryptographic Proof-of-Reserve, or other advanced cryptographic accounting procedure.

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Now, we shouldn’t jump to conclusions. But the refusal to supply proof of liquidity leaves the door open to rampant speculation. And that’s exactly what’s happening.

From Axios:

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As the market awaits [the latest update from Genesis], Crypto Twitter has been on edge.

Folks are openly debating about the health of Genesis, DCG and its affiliated units…

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Amid widespread concerns about solvency, Grayscale announced Friday it would not release a proof-of-reserves for its assets under management. [On Monday], its custodian Coinbase showed what reserves were as of Sept. 30.

Meanwhile, the Grayscale Bitcoin Trust continues to trade at a massive discount of roughly 40% to the underlying bitcoin it holds.

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The latest on DCG itself comes from a letter to shareholders written by CEO Barry Silbert about DCG’s lending situation.

From Crypto Briefing:

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In a shareholder letter, Digital Currency Group revealed that it has borrowed $575 million from Genesis Global Capital, its own subsidiary.

Silbert also revealed the existence of a $1.1 billion promissory note connected to the collapse of Three Arrows Capital.

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Silbert attempted to further assure clients that DCG and its subsidiaries remain stable….

Still, the company’s future is unclear, given the ongoing financial turmoil which affects the crypto market.

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Returning to FTX specifically, we’re now learning that a “substantial amount” of its assets is missing, possibly stolen

You’ll recall that FTX founder Sam Bankman-Fried recently claimed it was his mission to make all FTX customers totally whole.

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Good luck with that.

From The Wall Street Journal:

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A “substantial amount” of failed crypto exchange FTX’s assets is missing and may have been stolen as a run on customer deposits and a liquidity crunch precipitated a crisis of leadership and led the firm to collapse, its lawyer said in court on Tuesday.

“FTX was in the control of inexperienced and unsophisticated individuals, and some or all of them were compromised individuals,” said James Bromley, counsel to FTX’s new management…

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“What we have here is a worldwide, international organization, but which was run as a personal fiefdom of Sam Bankman-Fried.” Mr. Bromley said.

As it stands today, FTX owes money to more than one million customers. Its top 50 customers alone are owed approximately $3.1 billion.

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Our sympathies to any Digest readers caught up in this nightmare. If you’re not an FTX customer, it’s yet another reason to be grateful this Thanksgiving.

We’ll keep you updated as this story continues.

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Have a wonderful Thanksgiving!

Jeff Remsburg

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The post The FTX Contagion Spreads appeared first on InvestorPlace.

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