Byron Gilliam

This is a segment from The Breakdown newsletter. To read full editions, <a href="https://blockworks.co/brand/the-breakdown" target="_blank" rel="noreferrer noopener">subscribe</a>.



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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Trading is a hard way to make easy money.” — Wall Street aphorism
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<h2 class="wp-block-heading"><a href="https://open.substack.com/pub/zeneca33/p/letter-89-the-golden-age-of-crypto?utm_source=share&amp;utm_medium=android&amp;r=3qcul">The golden age of crypto is over</a></h2>



The newsletter writer Zeneca uses his perspective as a former poker player to declare that crypto’s golden era of easy money is over: “It’s only going to get tougher from here on out,” he warns.



When Zeneca started playing poker for money in 2003, he says “the average level of skill was extremely low,” and as a result, “basic strategies worked” to make money.



From there, however, the game progressively professionalized, and by 2010 making money in poker required learning math, statistics and game theory.&nbsp;



Today, the game is so efficient that, to have any chance of being profitable, you have to learn to play theoretically perfect poker from AI solvers. (Which really takes the fun out of it.)



This newsletter writer, using his perspective as a former equities player, can relate.



In the 1990s, you could make money in equities just by being a little quicker or paying a little closer attention than your human competitors.&nbsp;



If, say, you saw a positive headline about a company on the Reuters ticker, you had a few seconds to buy some stock that you could probably sell a few minutes later for a profit. It wasn’t that hard.



Better yet, investor flows were often bigger than traders could collectively accommodate.&nbsp;



This created easy money for anyone who cared to take it, sometimes by doing something as obvious as shorting stocks that were scheduled to drop out of an index and buying the ones being added, for example.&nbsp;



But equities professionalized on about the same timeframe as poker.&nbsp;



Starting in about 2000, quantitative and algorithmic trading made markets increasingly efficient at the same time that more and more people were trying to trade them.



By about 2005 there were too many traders trading against not enough investors — you could still make money trading, but it was increasingly hard work.



Now, though? Fuhgeddaboudit. Equity markets are so efficient you need a doctoral degree in a quantitative science to have any hope of trading them.



The crypto market seems to be progressing along the same path.&nbsp;



Zeneca likens crypto now to poker in 2012: “It’s still possible for many people to make it with a bit of work. But it’s no longer like shooting fish in a barrel.”



As with poker and equities, that’s partly because you’re now often competing with algorithms — sniper bots being one example.



Mostly, though, I think it’s what happened to equities by 2005: There are too many traders in crypto relative to the amount of investors in crypto.&nbsp;



Zeneca warns that traders waiting for a new wave of retail enthusiasm to make trading crypto easy again will be disappointed: “Just about anyone that has ever had any interest in speculating on crypto would have done so by now.”



I agree: Trading crypto won’t get any easier until there are more investors to trade against.



<h2 class="wp-block-heading"><a href="https://blockworks.co/news/blockworks-solana-investor-relations-platform">Blockworks launches investor relations platform</a></h2>



Blockworks is doing its part to attract the new investors crypto needs now with a platform offering “high-fidelity” data, institutional research, “ecosystem intelligence,” and investor relations workflows for Solana-based projects — in short, all the things that professional investors have long taken for granted in equities.



The platform will even provide quarterly reports, Dan Smith <a href="https://www.youtube.com/live/uju9vU4lfzo?si=lnLpCqY1kjlm_SIp&amp;t=18983">promises</a> — in a form that I’m guessing will make equity investors feel more at home in crypto.



Crypto builders looking to attract those kinds of investors can sign up <a href="https://lightspeed.vip/get-access">here</a>.



<h2 class="wp-block-heading"><a href="https://obviously.substack.com/p/why-your-coin-isnt-pumping">Why your coin isn’t pumping</a>&nbsp;</h2>



The crypto-native investor Santiago Roel Santos thinks it’s no mystery why tokens have been going down: “We valued casino flow like recurring software revenue.”



Token investors began paying attention to revenue this cycle and protocols began to prioritize, with notable success: An all-time high of <a href="https://1kx.network/writing/2025-onchain-revenue-report">$1.9 billion of value</a> was distributed to token holders in Q3.&nbsp;



But, perhaps disappointingly, these payouts have not helped token prices much.



Santos says that’s primarily because the quality of the revenue is so low: “You don’t give a Shopify multiple to a business that only makes money when the casino is full every three to four years.”



Critics responded to Santos by calling this a boomer take: Protocols are not businesses, they argue, they’re networks, so traditional metrics don’t apply.



Santos responded in turn with a <a href="https://obviously.substack.com/p/crypto-is-priced-for-network-effects">follow-up post</a> arguing that valuing crypto on its network effects leads him to the same conclusion: Tokens are egregiously overpriced.



“Crypto is valued at 5x–50x more market cap per user than Meta,” Santos says, “without having any of the economics that justify it.”



That’s kind of surprising, in a way: The purpose of crypto is to disintermediate businesses like Meta by creating peer-to-peer networks controlled by users who can come and go as they please.



Surely a user in that kind of network will be less valuable than a user trapped in a network like Facebook? Alternatively, it might be that crypto investors are paying up for tokens in anticipation of the imminent tokenization of everything — in which case, a huge influx of users will justify today’s valuations even if the open nature of blockchains makes it hard to monetize them.&nbsp;



Santos thinks the influx of users is possible, but doesn’t want to pay for it: “Right now,” he concludes, “too much future is priced in upfront.”



<h2 class="wp-block-heading"><a href="https://www.complexsystemspodcast.com/episodes/understanding-perpetual-futures/">Will crypto successfully export perps?</a></h2>



Patrick McKenzie thinks perpetual futures are unlikely to catch on with equities speculators, mostly because “liquidations are not the business model of traditional brokerages.”



“Liquidations” is a good business: Binance, McKenzie notes, charges a 0.5% liquidation fee on the notional value of the perps trades it liquidates.&nbsp;



On a trade leveraged 20x, that’s a 10% fee!



(This might explain why Binance’s BNB token is valued at $122 billion.)&nbsp;



McKenzie doesn’t think TradFi customers will pay those kinds of fees — especially as “learning on a day when markets are down 20% that you might be hedged or you might be bankrupt is not a prospect that fills traditional finance professionals with the warm and fuzzies.”



In other words, TradFi professionals are unlikely to accept the perps market practice of auto deleveraging (ADL).



McKenzie concisely defines ADL from the perspective of the broker: “You can either force the customer to enter a closing trade or you can assign their position to someone willing to bear their risk in return for a discount.”



Those are the only two options because perpetual futures are a “closed system” in which winning traders can only win as much as losing traders are willing to lose.



ADL is the clever mechanism by which trading venues ensure there are always enough losers to pay the winners. But it’s a messy process: By <a href="https://x.com/tarunchitra/status/1998451762232177041?s=20">one estimate</a>, perps venues liquidated winners 28x more than necessary during the Oct. 10 crash.&nbsp;



This estimate is <a href="https://x.com/chameleon_jeff/status/1998567869848891699?s=20">highly disputed</a>, but whatever the real ADL numbers are, margining practices are much friendlier in equities.



So it’s hard to argue with McKenzie’s conclusion that the crypto industry is unlikely to “export” its perpetual futures to traditional markets.&nbsp;



On the other hand, using perps to import retail speculators in search of easy money might still work.



People love to trade.



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crypto traders

Links: Trading, valuations, and the end of crypto’s ‘golden age’

Andrew Thurman

As prices dipped lower across the sector on Thursday, derivatives traders were among the hardest-hit with $90 million in long positions wiped out in just two hours.&nbsp;



According to data from <a href="https://www.coinglass.com/LiquidationData">Coinglass</a>, between 10:00 am and 12:00 pm ET, a sector-wide price plunge led by bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) dropping from $28,393 to $27,920 kicked off a series of liquidations across centralized exchanges. 



The two-hour washout is just a fraction of the $200 million lost over the last 24 hours — the highest total since June 9, when $348 million in longs were liquidated.



Leading the liquidations for the day are OKX, which liquidated $69.2 million in longs, followed by Binance, which wiped $47.3 million.&nbsp;



A lack of volatility in crypto large-cap assets such as bitcoin and ether (<a href="https://blockworks.co/price/eth">ETH</a>) means that the liquidation stats could have been even worse. Bitcoin has been trading in a $1,500 range between $30,000 and $28,500 for the better part of a month, and a recent Kaiko report found that both BTC and ETH have recently been less <a href="https://www.kaiko.com/">volatile</a> than oil. Traditionally, derivatives traders prefer assets with high volatility.&nbsp;



On-chain leverage positions may be the next area of focus if prices continue to drop. Because of DeFi protocols’ liquidation procedures, unwinding on-chain derivatives and leverage positions can lead to liquidation cascades and protocols programmatically sell user collateral.&nbsp;



According to <a href="https://defillama.com/liquidations/eth?stackBy=protocols">DeFiLlama</a>, $162.3 million is at risk of liquidation within a 20% price drop on the Ethereum chain alone, and $1.6 billion at risk total.&nbsp;



Ether is down 4.7% on the day to $1,736.



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Steep price pullbacks wipe $90M in longs

Shalini Nagarajan

FTX was fine until it wasn’t, and fears around its insolvency have sent shockwaves across crypto, hitting users hard. 



The crypto exchange paused withdrawals after seeing funds worth <a href="https://www.reuters.com/business/finance/crypto-exchange-ftx-saw-6-bln-withdrawals-72-hours-ceo-message-staff-2022-11-08/" target="_blank" rel="noreferrer noopener">around</a> $6 billion leave its platform in the last 72 hours. 



US-based platform FTX.US — a separate firm not part of the acquisition offer — remains operational and facilitating withdrawals. But users of FTX&#8217;s flagship exchange headquartered in Antigua and Barbuda are locked out of their funds. 



Several have taken to Twitter to disclose their entire net worth is tied up on the embattled platform.



FTX began facing heat after Binance CEO Changpeng Zhao <a href="https://cms.blockworks.co/binance-is-buying-ftx-a-timeline-of-events/" target="_blank" rel="noreferrer noopener">smelt a rat</a> and said his exchange would liquidate its stash of FTT tokens, in what he initially urged was not an attack on a direct rival. 



Investor panic quickly grew around a Terra-style death spiral. At the time, the platform was <a href="https://cms.blockworks.co/binance-ceo-goes-full-fud-in-attempt-to-bury-ftx/" target="_blank" rel="noreferrer noopener">processing</a> around $2.6 billion in daily volume but has handled $4.3 billion in the past 24 hours, per <a href="https://messari.io/exchanges" target="_blank" rel="noreferrer noopener">Messari</a>, ranking it fourth behind its new prospective owner Binance, Coinbase and Uniswap.



On Tuesday, the exchange attempted to calm fears by <a href="https://twitter.com/FTX_Official/status/1589790870290993152">tweeting</a> its team was working to reduce a withdrawal backlog. “Queue is decreasing and getting back to more reasonable levels,” it said. There&#8217;s been no update since.



<h3 class="wp-block-heading">FTX users feeling more than financial pain</h3>



Prominent crypto investor <a href="https://twitter.com/cobie/status/1590188580483497985" target="_blank" rel="noreferrer noopener">Cobie</a> described the state of affairs as the worst-ever “exchange rug.” In the crypto world, a “rug” or “rug pull” refers to a crypto project that seems promising but deserts investors by taking off with their funds.



It might be a stretch to consider the FTX situation an exit scam in the classical sense (it&#8217;s more appropriate to say it buckled under a bank run). Still, it’s clear that Cobie, like many, didn’t expect FTX to fail its users. 



“Every exchange that rugged in the past felt kinda unsafe to use pre-rug,” he <a href="https://twitter.com/cobie/status/1590188580483497985" target="_blank" rel="noreferrer noopener">tweeted</a>. “I thought there was [probably] sub-1% chance of FTX insolvency.”



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">assuming FTX funds are gone this is biggest 1 day loss in cat&#39;s life, mebbe le saddest part is cat may no longer sponsor streamers, art software, open source projects, etc, cus dat costs cat ~ 1M a year money was always a number, cat still will live in nice hotels, is oke&mdash; CL (@CL207) <a href="https://twitter.com/CL207/status/1590209288404103169?ref_src=twsrc%5Etfw">November 9, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Bitcoin trader and self-described Solana maximalist <a href="https://twitter.com/AWice/status/1590273446935941120" target="_blank" rel="noreferrer noopener">Alex Wice</a> said his entire net worth is on FTX, while <a href="https://twitter.com/Pixelsenpai1/status/1590273687495680004" target="_blank" rel="noreferrer noopener">another user</a> claimed he lost more than half his own.



FTX founder Sam Bankman-Fried is one of the <a href="https://twitter.com/SBF_FTX/status/1347964322459262977" target="_blank" rel="noreferrer noopener">loudest</a> investors in Solana and its ecosystem, having backed <a href="https://www.coindesk.com/markets/2021/04/28/serum-token-becomes-latest-project-in-bankman-fried-empire-to-turn-heads/" target="_blank" rel="noreferrer noopener">multiple</a> projects built on the platform throughout the years.



Bitazu Capital founding partner <a href="https://twitter.com/singhsoro/status/1590281496065363969" target="_blank" rel="noreferrer noopener">Mohit Sorout</a> indicated 95% of his funds were stuck on the trading platform. Early crypto investor <a href="https://twitter.com/lukebelmar/status/1590135228646858754" target="_blank" rel="noreferrer noopener">Luke Belmar</a> said he lost $120,000.



Others said they were not just hurt financially, but also <a href="https://twitter.com/DarknessDooma/status/1590294633007173633" target="_blank" rel="noreferrer noopener">emotionally</a> since they spent a considerable amount of time learning how to trade and utilizing bots, the fruits of which are currently in limbo.



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Had entire net worth on FTX, oops. Will do a FTX victim party live from Tokyo as a Twitter Space, about 29 hours from now. See you there. 🫡&mdash; Alex Wice (@AWice) <a href="https://twitter.com/AWice/status/1590273446935941120?ref_src=twsrc%5Etfw">November 9, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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DeFi influencer <a href="https://twitter.com/DegenSpartan/status/1590231725044793345" target="_blank" rel="noreferrer noopener">@DegenSpartan</a> said he managed to withdraw a significant amount, but “foolishly” left some as he thought the situation wasn’t too bad.



“[In my opinion,] Binance backs out, FTX shuts down, goes into bankruptcy and we see a fraction of our money in a few years,” he tweeted.



Blockworks hasn’t independently verified whether the users’ claims are true. But <a href="https://twitter.com/pepecasso1/status/1590231920147042304" target="_blank" rel="noreferrer noopener">Twitter</a> is <a href="https://twitter.com/CryptoChihiro/status/1590188482575896576" target="_blank" rel="noreferrer noopener">littered</a> with <a href="https://twitter.com/RunnerXBT/status/1590251416316436480" target="_blank" rel="noreferrer noopener">reports</a> from <a href="https://twitter.com/Tree_of_Alpha/status/1590273382712750080" target="_blank" rel="noreferrer noopener">users</a> <a href="https://twitter.com/LeCryptographe/status/1590265347739115523" target="_blank" rel="noreferrer noopener">disclosing</a> large chunks of their net worths stuck on FTX.



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">GM Crypto, I just lost a lot of money to FTX. If anyone else has been effected you&#39;re not alone, and its OK. This is the third time I&#39;ve lost money to an exchange so, once bitten, twice shy, the third time is a bit of a joke. lol! :p&mdash; mfer#6269 (@CryptoRat6) <a href="https://twitter.com/CryptoRat6/status/1590260840917528577?ref_src=twsrc%5Etfw">November 9, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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A spokesperson for FTX didn’t return Blockworks’ request for comment by press time.



Alexander Tkachenko, CEO of asset tokenisation platform VNX, weighed in on the matter, noting that FTX was objectively known as one of the best exchanges in the space.



“FTX appears to have been the source of liquidity for the various speculative transactions of the founders, which led to this situation. The sale of FTX and fulfilling its obligations to the users is the best option,&#8221; Tkachenko told Blockworks.



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">So I’ve likely lost a healthy 6 figures on FTX. Many others in the same boat, some more, some less. It’s all relative though. Life will go on, speak with your loved ones and prioritize your mental wellbeing if you’ve been caught up in this shitshow. Don’t do anything stupid.&mdash; tedtalksmacro (@tedtalksmacro) <a href="https://twitter.com/tedtalksmacro/status/1590213247889997824?ref_src=twsrc%5Etfw">November 9, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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It would be very damaging to the crypto industry if the Binance deal doesn&#8217;t go through, leading to users losing their assets, he added. &#8220;Zhao appears to understand this and is acting as the ‘lender of last resort.'&#8221;



Chris Bradbury, CEO of DeFi platform Oasis.app, said he wouldn’t describe FTX’s near-collapse as a “rug pull,” but that it did play with fire and get burnt. The value of user deposits still on FTX is currently unclear.



“If the Binance deal goes through, it looks like that will protect users who have funds on the platform and will be able to get their money out, however it&#8217;s still a big if regarding the deal going through by the looks of things,” Bradbury said.



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