15 Nov 2022

Crooks, contagion, distortion, and March 12 flashbacks

Crooks, contagion, distortion, and March 12 flashbacks
Ahead of the curve (9)

In Short

The market is severely distorted after FTX's fraudulent structure has been exposed. Funds, lenders and market makers have seen huge losses, in addition to retail traders with balances at FTX. We note extreme discounts in CME futures as institutional traders react to the devastating market collapse.


  • Bitcoin is down 18% in the past week, reaching lows not seen since 2020
  • The FTX collapse will lead to further contagion
  • CME basis reaches all-time low
  • CME OI reach ATH
After publishing our last report, the gravity of FTX’s dire situation quickly became apparent. The collapse took us by surprise, and it’s been shocking to learn the extent of the damage caused by FTX’s unforgivable mishandling of customer funds. To read our view on the implications of FTX’s collapse, check out our post from last Wednesday. In short, the insolvency has short-term led to a distorted derivatives market and harmed liquidity. We believe this will cause prolonged headwinds related to contagion, regulation, and institutional presence.
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