Crypto winter gets colder

Crypto winter gets colder

In the update to clients we published late Tuesday night, we noted that the acquisition of flailing FTX by Binance was conditional on due diligence and that the situation was evolving quickly. Since publishing, Binance completed due diligence and decided against acquiring FTX due to distressed assets. Crypto markets have been under pressure as a result and we have been active in an effort to control risk.

The fallout from the collapse of FTX and Alameda Research has shocked the crypto ecosystem once again. We've seen it several times this year – without the proper guardrails in place, over-leverage and the interconnectedness of the world of crypto can quickly lead to contagion. To be clear, we were never comfortable with the risks of owning FTX’s native token (FTT), nor have we done business with FTX.

Early Wednesday morning, we elected to sell our stake in Solana ($SOL) and trim our positions in Polygon ($MATIC) and Avalanche ($AVAX). 

Let’s dive in.

So long Solana

Our research indicates that roughly 29M $SOL (~$415M), as of the time of writing, will be deactivated from staking at roughly 4:30 AM ET on Thursday morning (11/10/22). Furthermore, Alameda Research’s second-largest holding is Solana. To the extent that it hasn’t already, this position will likely need to be fully liquidated over the coming days – putting intense downward pressure on the crypto asset. Other investors who have staked Solana are recognizing this dynamic are following suit further exacerbating market dynamics.

While we may be involved again at a future date, we believe there is a non-zero chance Solana will collapse in the near term. Fundamentals had softened in recent months, with total value locked (TVL), daily active addresses and transactions, and NFT volumes all declining.

Growing the Solana ecosystem with investment and support has been a top priority for FTX and Alameda Research. Without FTX and Alameda in the picture, we anticipate slower growth for Solana in the medium term, assuming it makes it out of this mess alive.

While making this exit Wednesday morning, we also elected to trim our positions in Polygon ($MATIC) and Avalanche ($AVAX) due to soft technicals. These trims are purely a risk management move, and our thesis continues to track for these tokens. 

We’re all hands on deck and will continue to stay nimble in the crypto strategy as needed. As always, we’re here for you. Let us know if you have any questions about this evolving situation.

Onwards,

Titan team

As of this writing, MATIC and AVAX are portfolio holdings of Titan. This security may cease to be portfolio holdings at some point in the future. 

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