Alameda-FTX Situation Awareness - Actions and Outlook
As the market contagion from the FTX & Alameda fallout spreads, we at AcheronTrading would like to reiterate our goals related to the management of client accounts and share our perspective on the situation.
The Acheron team is constantly evaluating unfolding events, taking the necessary steps to minimize exposure to risk and disruption to services:
We have maintained our risk-off position throughout the year, including minimizing exchange exposure whenever possible and promoting capital-efficient operations.
We have continued to invest in our decentralized exchange execution capabilities, offering unparalleled support to trustless platforms. Acheron currently supports trading on 17 decentralized exchanges across 14 blockchains.
Our current actions support our goal to continuously provide adequate liquidity for market participants across centralized and decentralized exchanges while exercising caution to mitigate risks related to client account balances.
Acheron remains strong and optimistic despite the current distress in the markets and industry:
Acheron has no material exposure to FTX and maintains a strong balance sheet to provide market-making services and grow our product offerings. Earlier this month, we announced the strategic acquisition of HedgeTech LLC: https://www.crunchbase.com/acquisition/acherontrading-acquires-hedgetech--169abbc6 Our future plans are undeterred by the exploitation of tourists in our industry.
Client accounts are segregated and never commingled with Acheron or other client accounts.
Acheron never uses customer funds for any purpose outside the market-making contract.
Acheron is not propped up by VC capital. We have no debt nor any loans outstanding whatsoever. We are committed to building the financial markets of tomorrow and ensuring our business is equipped to thrive throughout the turbulent market cycle.
Every client of Acheron can rest assured that we continue to take every measure to provide liquidity for our client's markets from the most embryonic stages and throughout their adoption cycle. We expect that consolidation will improve the industry's long-term health by purging the weaker players, resulting in greater resilience and more stable markets.
From our perspective, the cryptocurrency economy is fundamentally "on-chain," operating on full transparency (public ledger), secured by sound technology (cryptography, audited smart contracts). However, the industry's reputation is being damaged by players whose operations materially deviate from these fundamentals. Moreover, the further they deviate, the more likely they are to fail, as their problems stem from opaque "off-chain" agreements and transactions.
FTX & Alameda were disproportionately "off-chain" entities that transacted in cryptocurrencies primarily to take advantage of the asset class and circumvent regulations. The cryptocurrency markets were convenient, but not required, to achieve the most nefarious objectives of their business:
Maintaining wealth illusion.
Using it to access investors' money.
Maintaining subtle opacity to hide risks.
We have seen similar characteristics in traditional markets in Enron, Madoff, the GFC, and other instances. From our perspective, FTX & Alameda were more investors in the cryptocurrency economy than entities shaping its fundamentals.
For all assets, investors have a material impact on the performance of the price and stability; this is not a new perspective. Warren Buffet designed Berkshire Hathaway's Class A shares to have a high entry cost to encourage a stable shareholder base and lower price volatility. Cryptocurrency as an asset class has been influenced by its investors, including Celsius, 3AC, FTX & Alameda, and others who came under distress in 2022. These investors were large, and their behavior was reflected heavily in the cryptocurrency prices this year.
The current distress in the cryptocurrency market stands in contrast to the fundamentals of the cryptocurrency economy. From an "on-chain" perspective, the performance and progress of the top two cryptocurrencies by market cap are meeting or exceeding expectations. Ethereum transitioned successfully to proof of stake, and Bitcoin has progressed with transaction efficiency. Inflation and currency devaluation is strengthening the value proposition of alternatives to government-backed currencies as a store of value. The price action of the top two cryptocurrencies at the moment does not represent these fundamentals; they represent the state of investors.
From our perspective, recent price declines are due to the ills of the investment community despite the strong value proposition for cryptocurrencies. Uncertainty surrounding future regulation could impact the market unfavorably. Likewise, the industry's reputational damage will take some time to repair. However, patient participants in the cryptocurrency economy who adhere to the fundamental principles of transparency and sound technology will likely prosper in the years to come. As prices near 2019 levels, cryptocurrencies adhering to the fundamentals could appear undervalued to the broader investment community. An end in the Federal Reserve rate hiking cycle and a top in the USD strength could be on the horizon as soon as March 2023, which could return strength and positive momentum to the market.