It’s Wednesday, my dudes!

Didja get your little vote sticker yesterday? How about you paste it on your head and stick with us.

Tomorrow, we’ll do a full breakdown of the election and what the results mean for crypto, but hold on to your hat, we’ve got a hot one for ya.

Spilling the Beans

Some HUGE Crypto news, yesterday. An absolute bombshell. We’re of course, talking about Tumblr becoming self aware.

Just kidding, just kidding. We’re of course talking about the biggest development in the Crypto world, Binance has acquired FTX.

This is such big news, that it’s even restructured the format of this newsletter. We’re going to get into the Deep Dive first, and then hit you with headlines.

Can ya dig it?

Binance Acquires FTX

Binance CEO Chanpeng Zhao announced yesterday that FTX was absorbed into the Binance amoeba, 🦠 making the organism both stronger and larger. FTX US is not included in this acquisition.

Not his exact wording, but Zhao did include the disclaimer that, “Binance has the discretion to pull out from the deal at any time.”

Here’s some background on how we got here:

• Binance, the largest crypto exchange was an original investor in FTX

• FTX grew quickly and became the second largest crypto exchange

• FTX, like Binance, has a native cryptocurrency called FTT

• Binance is one of the largest holders of the FTT token

Too Many Marshmallows, Not Enough Baskets

FTX’s token, FTT, up until yesterday, was worth somewhere between $20-$25 a token, depending on the day.

FTX and its sister company Alameda Research owned significant portions of that FTT, billions of dollars worth of it, in fact.

Now, there’s a bit of an issue here: Imagine having $10 billion dollars in Peeps candy, y’know those marshmallow birds? 🐥 You’d be really rich, in theory.

But the problem with having $10 billion in Peeps candy is you don’t actually have $10 billion. In order to get that money in cash, you have to sell your Peeps.

But is there really enough demand for $10 billion in bird shaped marshmallows? If you sell all of your marshmallow birds at once, you’ll tank the value of them.

And that’s exactly what happened to FTX. Well, not exactly: it was FTT token, not candy.

The primary holders of FTT happened to be investors and FTX itself. One of those early investors was Binance, FTX’s old friend and now competitor.

So on Sunday, when Binance CEO CZ Zhao announced that his company would liquidate their $2 billion in FTT tokens, Zhao knew how it would tank the value of the FTT token, and FTX itself.

And it did just that, FTT token quickly dropped in value, and all of the sudden, nervous investors raced to their FTX accounts to withdraw their money. Until, FTX suddenly paused withdrawals. 

Uh oh.

FTX suddenly had a liquidity problem. See, they were worth billions, but they only had it in marshmallow candy, and all of the sudden marshmallow candy was worthless.

In a matter of hours, FTX went from a global superpower to a company trying to sell marshmallow candy. Is this metaphor still working?

But fortunately for FTX - or unfortunately rather - Binance was all too happy to take on their now worthless Peeps supply, for a significant discount.

The size of this acquisition deal is still unclear but the ramifications are absolutely massive.

Crypto markets reacted to FTX’s collapse with some instability of its own, the market saw nearly $100 billion in value wiped out. Bitcoin and Ethereum cratered back down to their early October levels.

Overnight the two biggest crypto exchanges in the world became one, and FTX CEO Sam Bankman-Fried’s massive fortune fell nearly $15 billion, he’s now worth less than $1 billion for the first time in years.

The devastated former billionaire was last seen playing the world’s tiniest violin atop a mountain of Peruvian cocaine on his private island.

Espresso Shots

☕️ US Treasury Redesignates Tornado Cash 🌪 💵

The US Treasury has amended earlier sanctions to the crypto mixer, Tornado Cash. These sanctions were initially in place because of Tornado Cash’s supposed ties to the North Korean Nuclear Program.

There were those who thought the initial sanctions were unjust. Coinbase and Coin Center took legal action against the US treasury, claiming that Tornado Cash is, “a privacy tool beyond the control of anyone.”

In some ways, the U.S. Treasury’s sanctions against Tornado Cash are kind of like my girlfriend suing incognito mode for its ties to my browsing history.

On November 3rd, North Korea, always chill, fired a series of missiles over Japan and into the ocean. But these weren’t the scary missiles that bring death, these were the fun missiles that establish power.

☕️ DeFi-ying Shady Wallets 💰 🚔

The Decentralized Finance sector, or DeFi, has come under fire recently for certain applications denying users access based on the content of their wallets.

Critics of these policies claim that De-Fi has just brought the worst, prejudiced practices from centralized finance, like Wall Street, to the blockchain.

Sergey Maslennikov, the CCO at 1inch, a De-Fi app company, feels that wallet restrictions are part of keeping the community safe.

The only wallets that would be affected are associated with “clearly illegal behavior like: terrorism financing, hacked or stolen funds, and child sexual abuse material.”

When it comes to the criticism of this policy, this may be a case of Web3 libertarianism going beyond the pale.

Just because an app’s guidelines don’t permit known terrorists, doesn’t mean their rules will infringe upon the libertarian ideals of free markets, setting fire to any building you want, or having toddlers run a factory.

Meme of the Day

Coffee and Crypto is fine. The emails are fine.

The Last Sip

It’s been a long one.

Thanks for sticking with us, like that “I Voted” sticker we mentioned at the top. Remember that?

With all the drama in the space, today’s last sip of coffee may just be the first sip of whiskey.

Stay sippin’,

Coffee & Crypto Team

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.