We want to provide some clarity around yesterday’s news regarding Binance and FTX.
First, none of Hashdex’s products have any exposure to Alameda Research, FTX, or the FTT token. We do not store any crypto asset on exchanges and only use segregated cold storage accounts with regulated custodians that meet the highest oversight, auditing, and security standards.
We also want to emphasize that our combination of stringent due diligence processes, high standards for eligibility criteria, and a conservative operational risk framework mitigates the risk of events like this materially impacting our shareholders.
So what happened?
FTX is a crypto exchange led by Sam Bankman-Fried (SBF), who also founded trading firm Alameda Research. On November 2, a CoinDesk article included information about an internal Alameda document that showed the distribution of balance sheet assets. These assets included FTT, the utility token issued by FTX and used by its clients for trading discounts or leveraged trading. FTT’s illiquidity sounded an alarm that Alameda could be in a bad financial situation.
Not long after, Binance’s CEO Chanpeng “CZ” Zhao announced that Binance is selling all its exposure to FTT. This accelerated fears about Alameda’s solvency, igniting an FTT selloff and a run on FTX. Yesterday, FTX client withdrawals stopped being processed and SBF announced that FTX was signing a non-binding letter of intent for a strategic transaction with Binance.
The impact of these unfortunate events may continue to play out in the next several days and weeks. We expect increased volatility will continue to negatively impact prices in the short term, and, as always, we closely monitor any impact to our portfolio holdings.
Our mission at Hashdex since our founding has been to provide secure and regulated access to the crypto ecosystem through institutional-quality products and processes. Despite anticipated short-term headwinds, we do not believe these recent events have any impact on the long-term investment case for crypto.
As we learn more in the coming days, we’ll communicate additional perspectives on what this all means for the crypto ecosystem and investors going forward.
In the meantime, please reach out to us with any questions.
Hashdex Chief Product Officer
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