> If you are a crypto exchange and you have a liquidity crunch and you cannot process withdrawals, and you don’t get a bailout, then your future equity value is

> If you are a crypto exchange and you have a liquidity crunch and you cannot process withdrawals, and you don’t get a bailout, then your future equity value is basically zero. If you tweet to all your customers “sorry we’re out of money for a bit so no more trading and we’re going to hang on to your money, but things will get better,” they will not get better. This is incorrect and coming from Levine, it's surprising. Especially, that the crypto ecosystem had an exchange that had just that (Bitfinex) and convinced users to take up the loss and carry operations (I was one of them). The exchange is still operating and one of the major exchanges in crypto. > You don’t have a ton of time to negotiate, and they don’t have a ton of time to do due diligence. How does the buyer know that there are no huge disasters lurking on your balance sheet? They don’t, and they don’t have much time to find out, and your liquidity crunch is not an encouraging sign. You are having a disaster now! They probably have a good idea. Crypto balances, at least the two largest, are public. And Binance is a large (largest?) exchange, so they probably can make a good guess of their balance sheets. > A lot of FTX’s business is in perpetual futures, a leveraged product, sometimes levered 20 to 1. If you are an exchange and you are in this sort of business, you will need to come up with the extra $100 to lend to your customer. Presumably that doesn’t come from your equity: You are doing some sort of borrowing, perhaps from other customers, 2 perhaps from outside financing sources, perhaps from your affiliated hedge fund, etc. This is also incorrect. There is no borrowing in derivative futures. The writer didn't really do his research. This is a case of cascading margin calls, but for very big guys. FTX tried to bail out some smaller guys but ended up getting margin called itself. Now Binance is picking the trade which carries itself a risk for getting margin called (ie: A liquidity crisis inside Binance). This will be the most optimistic scenario for Crypto, as it'll wipe out the largest exchange that it is enabling this scam industry and also changing the crypto culture (no-KYC, Decentralized, Trust-less, Permission-less etc...)