How FTX's Collapse Affects Other Projects

GM GM. Hope you had a good weekend cos last week got me listening to Till I Collapse by Eminem on repeat. Don't judge me. Had to remind myself that I am building in Crypto till I collapse.

Jokes aside. Today we've got

• The FTX contagion taking root

• Some sneaky news of some companies announcing funds raised in the week of FTX.

FTX insolvency becoming a contagion

Remember the movie Contagion? I guess we don't need to reference the movie with Covid 19 blazing through the world the last couple of years (too soon?).

Anyway, like any good old contagious virus, the FTX insolvency has set a chain reaction. Markets have reacted poorly to the news of the illegal use of customer funds at FTX. And what's worse? Many otherwise good-acting projects have been affected, from losing small operational funds to losing complete treasuries.

Before diving into the contagion, let's review what's happened

• Nov 2 - Coindesk exclusive published, revealing details about Alameda's balance sheets. Of particular interest is the exceedingly large amount of FTT (FTX native token) on their balance sheets.

• Nov 6 - Binance Exchange CEO "CZ" (Changpeng Zhao), Tweets he is selling the remainder of FTT tokens controlled by Binance. Almost immediately after this, Caroline Ellis, CEO of Alameda Research offers to buy the tokens at $22 each.

• Nov 8 - FTT falls below $22 a token, overall market is panicking as more details have yet to come from official sources. Binance announces a non-binding letter of intent to buy FTX and begins due diligence.

• Nov 9 - Coindesk begins to report Binance is already backing off the deal, after just a few hours of reviewing the FTX books.

• Nov 10 - Justin Sun (CEO of TRON) drops hints at saving FTX. Details, as usual from Justin did not immediately follow.

• Nov 10 - SBF (CEO of FTX) announces Alameda Research is "Winding Down" operations, sparking a flurry of FUD on Twitter as to why operations did not immediately cease. FTX Assets are "Frozen" by the Bahamian authorities.

• Nov 11 - FTX files for Chapter 11 Bankruptcy Protection in the US.

• Nov 12 - Backdoor to FTX exploited by "hacker" who drains accounts for $400M. SBF flies to the Bahamas where he is eventually detained. Unconfirmed but setting off the where in the world is SBF vibe. 

• Nov 13 - Twitter Spaces explode with user investigations, and questions about large projects in the industry, as the news of projects losing all their funds on FTX spreads like wildfire.

OK.... Now we are all caught up.

What does this mean for web3 games

The reach of this collapse has been widespread. I mean look at how many projects they have invested in without considering the projects that used the exchange to store funds.

The good news is we are starting to see some hope for the NFT and Gaming arm of crypto. Many project founders and co-founders have issued statements of solvency sharing their status of finances after the FTX hack. Twitter User "Teng" @0xPrismatic tweeted a great excel list of those statements.

Among those unaffected we have top names like

• YUGA LABS (Bored Ape Yacht Club)

• RTFKT (Clone X)

• Azuki

• Doodles

• Cool Cats

• DigiDaigaku

• Pudgy Penguins

• World Of Women

• Truth Labs (Goblintown)

Some projects like "Immutable" (Gods Unchained) went as far as to reveal their holdings. Immutable announced they had 3.5 years of runway cash. Animoca brands stated it had minimal exposure to FTX and has a $214M cash balance.

Among those affected were

• Star Atlas (Space Exploration Web3 Game) has reportedly lost around 50% of its assets. A web3 game of this magnitude requires massive operational costs to pay devs, they may end up seeking more funding.

• Galois Capital (Hedge Fund) Announced $40M locked in FTX.

• Jump Crypto - Announced it remains well capitalized, and that it's exposure was handled by their risk framework. No further details were given about the nature or amounts of exposure.

As the new week unfolds, we may likely continue to see announcements like the above for the next few weeks...both good, and bad.

What comes next?

Let's put on our prediction hat for a second to see what could happen next.

• With relative certainty, web3 and web3 gaming would survive and probably thrive because of the big lessons coming out of this collapse.

• We may start to see many more projects reviewing their method of asset treasury storage. Multi-sig wallets being the main contender.

• Some projects would go bust due to having funds stuck in FTX. CZ of Binance recently tweeted they would be setting up a Crypto Recovery Fund to save solid projects.

• Web3 gaming may see an additional backlash from the Esports community, and find it hard to advertise or sponsor these events in the future. FTX was big on advertising, sponsorship (ala FTX arena), and even influencers got caught in the fallout.

• FTX ventures and Alameda Research had their hands in the cookie jar of many projects. We don't know the details of the deals but imagine if some have been funded with FTT tokens that the project would slowly divest. Those are going bust.

The sneaky news you may have missed

• Xternity (Web3 gaming infrastructure) raises $4.5 million: Israel-based start-up "Xternity" is helping web2 game publishers use web3 and NFTs, through its "no-code" platform. The platform allows publishers to create NFT collections and offers them a customized wallet, as well as a loyalty club. The platform supports Polygon, ImmutableX, Solana, Binance, Celo, and Ethereum. Check it out here.

• Gaming company "Eterlast" announces 4.5M funding: Gaming company "Eterlast" has raised $4.5 million to bring web3 games to sports fans. The round was led by Supernode Global and included participation from investors such as Immutable X, Stake Capital, and Founders Factory. The startup's tech stack is built on ImmutableX, a scaling solution that builds on StarkWare's zero-knowledge-proof system. Check it out here.

That's a wrap for today frens...

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