Before we dive in today, I wanted to thank everyone who joined me for the One Percent event yesterday! It was great to have you there.
If you missed yesterday’s event, you can find the replay here.
With that, let’s jump right into today’s Market 360…
In one of my Special Market Podcasts last week, I finally broke my silence on the FTX Crypto Collapse.
If you haven’t been following, earlier this month FTX had a rollercoaster of a week that ended in bankruptcy.
Long story short…
Binance – the No. 1 crypto exchange – was an early investor in FTX, formally the No. 2 exchange. When it exited FTX equity last year, it received $2 billion worth of FTX’s FTT tokens. Earlier this month, Binance announced it would liquidate its FTT tokens as a form of risk management “due to recent revelations that came to light.” Binance initially planned to sell its FTT over the coming months to avoid having a large impact on the token’s price. But that’s not what happened…
On Sunday, November 6 (remember, crypto markets don’t close), Binance began dumping its $2 billion FTT on the market – which, in turn, spooked investors. FTX saw $5 billion in withdrawals in one day.
Problem was, FTX was collateralizing its risk with its own faux tokens. Half of Alameda Research’s – FTX CEO Sam Bankman-Fried’s trading firm – assets were in its FTT token, which was getting obliterated by the market.
As a result, FTX declared bankruptcy on Friday, November 11. And the result was a collapse in nearly all cryptos, including Bitcoin (BTC):
With $3.1 billion in creditors now looking for money in the FTX bankruptcy, this Ponzi scheme is only expected to get worse…
Stay Away From Tokens…
The FTX founder, Sam Bankman-Fried (also known as SBF) was at the White House at least twice this past year. He’s known well by many members of Congress, as well as SEC Chairman Gary Genseler (who ironically taught cryptocurrencies at MIT). The fact that Sam Bankman-Fried was the second biggest political donor after George Soros and pushed ESG policies may explain why he was so welcome in D.C.
Complicating matters further, FTX speculated with client funds via Alameda Research, led by Caroline Ellison – the daughter of Glenn Ellison, an MIT economic professor and former boss of Gary Genseler. SBF went to MIT.
Multiple anchors on CNBC called SBF the next “J.P. Morgan,” especially Jim Cramer. However, the most embarrassing CNBC fiasco regarding FTX came from Shark Tank’s Kevin O’Leary, who said, “If there’s ever a place I can be in, I’m not going to get in trouble, it’s going to be at FTX.”
As part of the bankruptcy proceedings, SBF was replaced as CEO by John Jay Ray III – an expert at corporate turnarounds which includes Enron’s bankruptcy. Ray has said in his over 40 years of experience dealing with insolvencies he has never seen “such a complete failure of corporate control.” Adding that “this situation is unprecedented.”
Since the FTX debacle started, other crypto related companies started to fall like dominos: On Monday, crypto lender BlockFi filed for chapter 11 bankruptcy protection. As reported by The Wall Street Journal, BlockFi blamed its bankruptcy partly on FTX – also citing the downturn in cryptocurrency prices recently.
The bottom line is any cryptocurrencies that promote “tokens” need to be registered with the Securities and Exchange Commission (SEC) since those tokens are considered securities. And until they are, I recommend staying far, far away.
The Best Way to Pull Consistent Gains Out of the Market
Personally, I recommend sticking with stocks.
Specifically, companies with superior fundamentals, institutional buying pressure and great earnings…
In yesterday’s One Percent event, I shared how to turn every $5,000 into $26,650… and every $20,000 into $101,948… in less than a year, without taking on any big risks.
I also shared how you’ve been misled by the media to believe there’s no opportunity in today’s market, how to find massive income opportunities in the worst bear markets and how the One Percent earns a huge portion of their income from a unique income source.
If you missed the event, not to worry. You can access the replay by simply clicking here.
Bottom line: Stay away from tokens and focus on fundamentally superior stocks with low risk and high reward.