FTX’s Wrecked Balance Sheet Destroys Crypto
Can You Read and Interpret a Balance Sheet?
--
Balance Sheets are in the news.
The crypto world is reeling from the implosion of FTX, the second-biggest exchange in the ecosystem. As a result, Crypto is discredited, venture capital is bruised and dented, and billions and billions of investor wealth have evaporated.
FTX and SBF have entered the pantheon of fraudsters and failures like Bernie Madoff, Enron, and Lehman Brothers.
Cryptocurrency is new and developing. The math-based system is learning all the lessons of traditional financial systems. But at warp speed. Its growth spurts are recapitulating the booms and busts of the last several centuries, compressed into months over a few years.
It’s not a smooth ride. It is a sh*t storm of epic proportions.
But for all these growing pains, the rationale for cryptocurrency is proved by government actions, fiat currency regimes, and inflation.
For all its innovation, Crypto relies on traditional financial reporting: the financial statements.
We hear CZ and Binance moved away from a rescue effort when they uncovered a supermassive black hole in FTX’s Balance Sheet.
The contagion is spreading.
A big concern is how many other dominoes will fall because of intertwined Balance Sheets.
Meanwhile, Coinbase, a major exchange, has its CFO going on media interviews, differentiating itself by touting its strong Balance Sheet.
WTF is a Balance Sheet?
Now is an excellent time to brush up and get comfortable reading and interpreting financial statements.
Check out my video for a quick primer on the Balance Sheet.
Balance Sheet Basics
The Balance Sheet shows the financial position of an entity on a specified date, usually the last day of an accounting period.
Among other information, a balance sheet states
• What…
