Hey folks, so if you’ve been following along with my other articles, you’ll notice this is a second list of observations that I’ve had since the collapse of FTX, and at the rate that news is coming out on twitter, I suspect that this won’t be my last. News surrounding FTX is literally changing by the hour, so I wouldn’t be surprised if the whole narrative changes and rotates several times between now and the end of the weekend. Regardless, given the state of affairs, the following are some of the observations that I’ve made over the past few days.

Yet before diving into a lot of dark and troubling news about CeFi, I thought I’d start out with a positive one on DeFi:

Gains Network is absolutely killing it

I’ve written about Gains Network before, but in a nutshell, it’s a similar platform to GMX as users are able to profit from platform trader fees/liquidations while at the same time offering cheap 150x leverage for traders. I know GMX has done lately as well too, but I’ve been a bigger fan of Gains Network because of their $DAI Vault:

With all the crazy volatility in the market right now, it’s pretty obvious that there’s a lot of traders getting liquidated because the $DAI Vault (and really all the other pools) have been running red hot at around 19–20% APY. Apart the fact its based on stables, what’s awesome about the $DAI vault is that it’s #realyield, and the yield itself is paid out in $DAI — therefore, no exposure to any altcoins.

Ok now with that out of the way, on to the CeFi’s takes…

Japan is a good example of how “good” regulation can protect consumers

Earlier today there were reports made that FTX Japan was beginning to allow withdrawals of users funds, albeit slowly:

You might be thinking — “wtf? why Japan?”, especially if your funds are currently still frozen in your own account.

The reason why Japanese users are probably able to do this is because of regulation — Japanese law requires users’ funds to be managed separately from the exchange’s own, meaning that you cannot pull an Alex Mashinky and start loaning out users’ crypto to other people. This type of regulation does not exist in the United States, hence you do not see actors such as SBF that are seemingly doing whatever they want with customer assets. The reason why Japan has these regulations is probably because of what they learned from Mt. Gox. Hopefully, U.S. regulators will learn from FTX as well.

I know that there’s a lot of controversy surrounding exactly how much government regulation there should be, but just from a simple standpoint it makes sense that basic consumer protections be put in place — in my opinion this would increase consumer confidence and bring in more capital into the cryptospace. And speaking of crypto regulation…

Bitboy was right.

I’ve been in crypto for years now, and the only exposure I’ve had of BitBoy is usually because of something negative (i.e., pump-and-dumbs, suing small-time influencers, Investigations By ZachXBT). It wasn’t really until I saw the Bankless guys host him personally on their podcast where I finally understood where he was coming from, but more importantly why he felt so angry and betrayed by SBF. Hate him or love him, but in my opinion Bitboy did the best he could to sound the alarm about SBF months ago and recently, he posted a video about influencers needing to show integrity. I agree, this is something that we all must adhere to, and as much as I hate to say it, I now follow and subscribe to the Bitboy Nation.

For those of you that haven’t been following the Bitboy/Bankless/SBF drama, in a nutshell, BitBoy found out through third parties that SBF was trying to pass DCCPA, which was legislation similar to New York’s BitLicense which would probably hamper DeFi innovation and benefit only a select few (namely SBF). What made things worse was that SBF, instead of being transparent and open about what he was doing, allegedly tried to sabotage the alternate legislation that Bitboy was working on and instead tried to manipulate away his support behind his back. Sound like a soap opera? Totally is. If you’re a junkie for that sort of thing, I highly recommend that you take a look at his youtube channel — you’ll see how the whole narrative played out.

Contagion is already happening and it’s probably going to happen for awhile

If you’re uncertain of whether or not your personal exchange/platform/protocol/project is under threat of contagion, there’s a great thread by CryptoCondom which outlines many of the big players that are involved:

FTX/Alameda had a lot of tentacles everywhere, and last spring they spread out even further when other exchanges started falling, with FTX buying/bailing them out. Therefore, it came as little surprise when I saw BlockFi announce this earlier today:

I’m not sure of what/how funds were provided to BlockFi when FTX bailed them out last Spring, but it’s obvious that there’s trouble in the air. Given the fact that there’s so much fear in the crypto-market right now, I think it’s a good idea that if you have any assets on any CeFi platform or CEX right now, to ask yourself how comfortable/uncomfortable you are if it’s “not your keys.”

There’s probably a lot more that I could dive into about conspiracies and potential casualties of this contagion, but I’ll just leave you with this before it makes my mind explode:

Conclusion

I truly feel for all the folks that are hurting out there because of this and I’m not blaming people for wanting to bow out of Crypto all together. As I mentioned before, I don’t believe that we’ve seen the last of it as there are probably more dominos yet to fall, but what I am hoping is that the biggest ones have fallen already. Hopefully none of you had money on FTX, but if you did, I hope you were able to get money out before they started freezing withdrawals. If you were one of the unlucky ones, I would highly recommend that you start following Crypto-news outlets that can help alert you to when the writing is on the wall.

Thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates.

Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you. Stay safe everyone!