I know, I know, the entire internet is talking about Twitter this week and I'm going to mostly not do that here. Half my feed is people posting screenshots of badge access getting cut off and the other half is jokes about the $8 checkmark, and honestly by Wednesday night I was kind of sick of all of it. Not because it isn't a big deal, it obviously is, it's just that I don't have anything to say that four hundred other blogs havent already said better. So instead let me tell you about a document I read at like 11pm last night lying in bed that I genuinely cannot stop thinking about.
CoinDesk got their hands on a balance sheet from Alameda Research, the trading firm run by Sam Bankman-Fried (the same guy who runs the crypto exchange FTX, which is its own tangle we'll get to). The sheet says Alameda is sitting on $14.6 billion in assets as of the end of June. Fine, big number, crypto firms have big numbers. But then you look at what's actually in that pile and $3.66 billion of it is FTT, unlocked. Another $2.16 billion is FTT used as loan collateral. FTT, in case that means nothing to you, is a token that FTX itself created and mostly trades between FTX and Alameda and their own friends. Its like if I printed my own coupons, declared they were worth ten bucks each because I said so, and then told my bank I had a few million dollars in coupon-based net worth.
Maybe that's unfair. Maybe there's a real market for FTT and I'm being a jerk about it (I looked, there sort of is, but the daily trading volume is nowhere close to what you'd need to justify that kind of paper value being real if everyone tried to cash out at once). Thats the whole issue with any asset a company invents itself: it's only worth what it says its worth until the exact moment somebody tests that, and then it's worth whatever somebody will actually pay, which can be a very different number very fast.
I've been half following crypto since like 2013 when a guy at a hackathon in Cambridge tried to pay me back for pizza in bitcoin and I said no because I didnt want to deal with a wallet. In hindsight that was either a genius move or the dumbest financial decision of my life depending which week you ask me, and I've made my peace with never knowing which. But the thing that always gets me about this industry isnt the technology, its the accounting. Actual, boring, GAAP-style accounting. Alameda and FTX are run by the same small group of people, trading assets that one of them invented, and apparently nobody outside that circle gets to see the real books unless somebody leaks them to a reporter. Caroline Ellison runs Alameda day to day and has been pretty candid in interviews and on her own Twitter about how the firm operates, which I respect, but candor about strategy isnt the same as a real audited balance sheet with someone outside the family checking the math.
None of this is me predicting anything is about to blow up, to be clear, I have no idea and neither does anyone reading this. Crypto firms have looked shaky before and limped along for years. What I keep coming back to is just how normal this is treated as. If a regular bank told regulators that a fifth of its assets were a currency it printed itself, there would be people in suits in that building by lunchtime. In crypto you publish a blog post about your "transparent" reserves and mostly everyone moves on.
Anyway. I bought a space heater for my office today because it's finally cold enough here that typing with fingerless gloves stopped being a bit and started being necessary, $34.99 at the hardware store two blocks over, and it smells like burning dust the first twenty minutes every time you turn it on, which the internet assures me is normal and not a fire starting. Small comforts. Go read the CoinDesk piece if you want the actual numbers laid out properly, they did the real work here, I'm just the guy up too late thinking about it.