A Nuanced Approach to Estimating Mark-to-Market Crypto-Asset Values

Introduction

The reasons for the monumental collapse of FTX still aren’t entirely clear. There are numerous theories that speculate on what went down. Yet, nothing can be said with absolute certainty. That said, several pieces of this puzzle have been uncovered, and there’s one that stands out clearly.

It is now widely believed that Alameda incurred huge losses during the market downturn in Q2/Q3 2022. The situation seems to have been so dire that they had only two options: borrow more money or shut down. To avoid the latter, Alameda allegedly posted illiquid tokens such as FTT, OXY, FIDA, MAPS, etc., to borrow USD (or equivalent) from its sister company FTX.

In other words, Alameda transferred their illiquid book to FTX in exchange for liquid customer funds.

Imagine this: