Bitcoin drops to a new low for the year, FTX token loses 80% in broad crypto sell-off
The cryptocurrency market tumbled on Tuesday after the two biggest crypto exchanges in the world, Binance and FTX, came to a merger agreement to fix the latest “liquidity crunch.”
Bitcoin was last lower by 13% and trading at $18,064.00, according to Coin Metrics. Earlier in the afternoon it fell to $17,300.80, its lowest level since November 2020. Ether was last lower by 16% at $1,334.98. It fell as low as $1,228.89 earlier.
Those declines spread throughout the rest of the market, even stealing steam from the stock market rally. Smaller crypto assets tied to Alameda, the trading company also owned by FTX’s Sam Bankman-Fried, suffered bigger losses. FTX Token (FTT), the native token of the FTX trading platform, fell 76.5%. The token tied to Ethereum competitor Solana, of which Alameda is a big backer, lost 28.4%.
In crypto equities, Coinbase slid 11%, and Robinhood, which Bankman-Fried has a 7.6% stake in, was last lower by 14.5%. Crypto banks like Silvergate and Signature and bitcoin miners like Hut 8 and Riot Blockchain were down double-digit percentages.
The moves came after Bankman-Fried, CEO of crypto exchange FTX, announced on Twitter that Binance will buy its non-U.S. business for an undisclosed sum. Binance CEO Changpeng Zhao confirmed the news minutes later on Twitter.
The deal will affect only the non-U.S. businesses of FTX and Binance. The U.S. arms of each company, Binance US and FTX US, are separate and will be unaffected, Bankman-Fried, also known as SBF, said in his tweets. The deal has not closed and the companies have more due diligence to do, the CEOs said.
The crypto market slid to start the day as investors’ worries about the solvency of FTX continued to fester, following rumors about the exchange and its sister company Alameda Research that emerged in recent days. It briefly rebounded after the deal came together.
“There are a lot of mirrors to the Celsius and Three Arrows crisis that happened months ago and what you’re seeing is investors having deja vu and fear leaking into the markets,” said Conor Ryder, research analyst at Kaiko.
A rumor that sparked a ‘bank run’
Investor confidence has been shaken after Binance founder Changpeng Zhao tweeted over the weekend that the company would sell its holdings of FTT. Binance is the largest crypto exchange in the world by trading volume and was an early backer of FTX. On Tuesday morning, FTX halted withdrawals from its platform, after spooked investors attempted to pull their funds en masse.
Zhao said in his tweet that Binance has about $2.1 billion worth of FTT and BUSD, the fiat-backed stablecoin issued by Binance and Paxos, combined.
“Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books,” he said.
Those revelations refer to rumors about the solvency of FTX, the second-biggest crypto exchange in the world by trading volume. A CoinDesk report last week on the state of Alameda’s finances showed a large portion of its balance sheet is concentrated in FTT and its various activities leveraged using FTT as collateral. Alameda has disputed that claim, saying FTT represents only part of its total balance sheet.
“The Alameda hedge fund is tied to FTX through a ton of FTT tokens and the rumors started that if they are using all of these FTT tokens as collateral… there are two issues,” said Jeff Dorman, chief investment officer at Arca. “If the price of FTT goes way down then Alameda could face margin calls and all kinds of pressure; two is if FTX is the lender to Alameda then everyone’s going to be in trouble.”
“What could have been just an isolated issue at Alameda became a bank run,” he added. “Everybody started to pull their assets out of FTX and there’s this fear that FTX would be insolvent.”
A ‘black eye for trust’
Ryder said industry observers “generally” had confidence that FTX and its customers “will be fine” but that the panic was understandable. Before late Tuesday morning, SBF had said little on the matter to quell fears.
“The problem is the opaque nature and the lack of transparency about FTX reserves, Alameda’s reserves, the links between the two – no one really knows how to intertwined the two are,” he said. “From that side of things, it mirrors Celsius issues a lot in that we have no transparency of funds, and FTX hasn’t come out and reassured investors so that’s what we’re seeing now leak into markets.”
It’s a good argument for more regulation of centralized entities, Ryder added, saying it’s imperative for all centralized entities – be it hedge funds like Three Arrows Capital or Alameda Research or centralized exchanges like FTX and Binance that aren’t publicly listed – to maintain a proof of reserves for the sake of investor protection.
Dorman echoed Ryder’s sentiment, saying that while it may be at worst a short-term liquidity issue for the market, it’s “another black eye for trust.”
“Do they put [the reserves] in a bank account? Do they use them to lend out?” Dorman said. “This is where the lack of transparency comes in: something that probably isn’t a problem and shouldn’t be a problem becomes a short-term liquidity problem if FTX can’t immediately process all withdrawals.”
Alex Karp, CEO of Palantir Technologies speaks during the Digital X event on September 07, 2021 in Cologne, Germany.
Andreas Rentz | Getty Images
Palantir shares continued their torrid run on Friday, soaring as much as 9% to a record, after the developer of software for the military announced plans to transfer its listing to the Nasdaq from the New York Stock Exchange.
The stock jumped past $64.50 in afternoon trading, lifting the company’s market cap to $147 billion. The shares are now up more than 50% since Palantir’s better-than-expected earnings report last week and have almost quadrupled in value this year.
Palantir said late Thursday that it expects to begin trading on the Nasdaq on Nov. 26, under its existing ticker symbol “PLTR.” While changing listing sites does nothing to alter a company’s fundamentals, board member Alexander Moore, a partner at venture firm 8VC, suggested in a post on X that the move could be a win for retail investors because “it will force” billions of dollars in purchases by exchange-traded funds.
“Everything we do is to reward and support our retail diamondhands following,” Moore wrote, referring to a term popularized in the crypto community for long-term believers.
Moore appears to have subsequently deleted his X account. His firm, 8VC, didn’t immediately respond to a request for comment.
Last Monday after market close, Palantir reported third-quarter earnings and revenue that topped estimates and issued a fourth-quarter forecast that was also ahead of Wall Street’s expectations. CEO Alex Karp wrote in the earnings release that the company “absolutely eviscerated this quarter,” driven by demand for artificial intelligence technologies.
U.S. government revenue increased 40% from a year earlier to $320 million, while U.S. commercial revenue rose 54% to $179 million. On the earnings call, the company highlighted a five-year contract to expand its Maven technology across the U.S. military. Palantir established Maven in 2017 to provide AI tools to the Department of Defense.
The post-earnings rally coincides with the period following last week’s presidential election. Palantir is seen as a potential beneficiary given the company’s ties to the Trump camp. Co-founder and Chairman Peter Thiel was a major booster of Donald Trump’s first victorious campaign, though he had a public falling out with Trump in the ensuing years.
When asked in June about his position on the 2024 election, Thiel said, “If you hold a gun to my head I’ll vote for Trump.”
Thiel’s Palantir holdings have increased in value by about $3.2 billion since the earnings report and $2 billion since the election.
In September, S&P Global announced Palantir would join the S&P 500 stock index.
Analysts at Argus Research say the rally has pushed the stock too high given the current financials and growth projections. The analysts still have a long-term buy rating on the stock and said in a report last week that the company had a “stellar” quarter, but they downgraded their 12-month recommendation to a hold.
The stock “may be getting ahead of what the company fundamentals can support,” the analysts wrote.
Charles Liang, chief executive officer of Super Micro Computer Inc., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024. The trade show runs through June 7.
Annabelle Chih | Bloomberg | Getty Images
Super Micro Computer could be headed down a path to getting kicked off the Nasdaq as soon as Monday.
That’s the potential fate for the server company if it fails to file a viable plan for becoming compliant with Nasdaq regulations. Super Micro is late in filing its 2024 year-end report with the SEC, and has yet to replace its accounting firm. Many investors were expecting clarity from Super Micro when the company reported preliminary quarterly results last week. But they didn’t get it.
The primary component of that plan is how and when Super Micro will file its 2024 year-end report with the Securities and Exchange Commission, and why it was late. That report is something many expected would be filed alongside the company’s June fourth-quarter earnings but was not.
The Nasdaq delisting process represents a crossroads for Super Micro, which has been one of the primary beneficiaries of the artificial intelligence boom due to its longstanding relationship with Nvidia and surging demand for the chipmaker’s graphics processing units.
The one-time AI darling is reeling after a stretch of bad news. After Super Micro failed to file its annual report over the summer, activist short seller Hindenburg Research targeted the company in August, alleging accounting fraud and export control issues. The company’s auditor, Ernst & Young, stepped down in October, and Super Micro said last week that it was still trying to find a new one.
The stock is getting hammered. After the shares soared more than 14-fold from the end of 2022 to their peak in March of this year, they’ve since plummeted by 85%. Super Micro’s stock is now equal to where it was trading in May 2022, after falling another 11% on Thursday.
Getting delisted from the Nasdaq could be next if Super Micro doesn’t file a compliance plan by the Monday deadline or if the exchange rejects the company’s submission. Super Micro could also get an extension from the Nasdaq, giving it months to come into compliance. The company said Thursday that it would provide a plan to the Nasdaq in time.
A spokesperson told CNBC the company “intends to take all necessary steps to achieve compliance with the Nasdaq continued listing requirements as soon as possible.”
While the delisting issue mainly affects the stock, it could also hurt Super Micro’s reputation and standing with its customers, who may prefer to simply avoid the drama and buy AI servers from rivals such as Dell or HPE.
“Given that Super Micro’s accounting concerns have become more acute since Super Micro’s quarter ended, its weakness could ultimately benefit Dell more in the coming quarter,” Bernstein analyst Toni Sacconaghi wrote in a note this week.
A representative for the Nasdaq said the exchange doesn’t comment on the delisting process for individual companies, but the rules suggest the process could take about a year before a final decision.
A plan of compliance
The Nasdaq warned Super Micro on Sept. 17 that it was at risk of being delisted. That gave the company 60 days to submit a plan of compliance to the exchange, and because the deadline falls on a Sunday, the effective date for the submission is Monday.
If Super Micro’s plan is acceptable to Nasdaq staff, the company is eligible for an extension of up to 180 days to file its year-end report. The Nasdaq wants to see if Super Micro’s board of directors has investigated the company’s accounting problem, what the exact reason for the late filing was and a timeline of actions taken by the board.
The Nasdaq says it looks at several factors when evaluating a plan of compliance, including the reasons for the late filing, upcoming corporate events, the overall financial status of the company and the likelihood of a company filing an audited report within 180 days. The review can also look at information provided by outside auditors, the SEC or other regulators.
Last week, Super Micro said it was doing everything it could to remain listed on the Nasdaq, and said a special committee of its board had investigated and found no wrongdoing. Super Micro CEO Charles Liang said the company would receive the board committee’s report as soon as last week. A company spokesperson didn’t respond when asked by CNBC if that report had been received.
If the Nasdaq rejects Super Micro’s compliance plan, the company can request a hearing from the exchange’s Hearings Panel to review the decision. Super Micro won’t be immediately kicked off the exchange – the hearing panel request starts a 15-day stay for delisting, and the panel can decide to extend the deadline for up to 180 days.
If the panel rejects that request or if Super Micro gets an extension and fails to file the updated financials, the company can still appeal the decision to another Nasdaq body called the Listing Council, which can grant an exception.
Ultimately, the Nasdaq says the extensions have a limit: 360 days from when the company’s first late filing was due.
A poor track record
There’s one factor at play that could hurt Super Micro’s chances of an extension. The exchange considers whether the company has any history of being out of compliance with SEC regulations.
Between 2015 and 2017, Super Micro misstated financials and published key filings late, according to the SEC. It was delisted from the Nasdaq in 2017 and was relisted two years later.
Super Micro “might have a more difficult time obtaining extensions as the Nasdaq’s literature indicates it will in part ‘consider the company’s specific circumstances, including the company’s past compliance history’ when determining whether an extension is warranted,” Wedbush analyst Matt Bryson wrote in a note earlier this month. He has a neutral rating on the stock.
History also reveals just how long the delisting process can take.
Charles Liang, chief executive officer of Super Micro Computer Inc., right, and Jensen Huang, co-founder and chief executive officer of Nvidia Corp., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024.
Annabelle Chih | Bloomberg | Getty Images
Super Micro missed an annual report filing deadline in June 2017, got an extension to December and finally got a hearing in May 2018, which gave it another extension to August of that year. It was only when it missed that deadline that the stock was delisted.
In the short term, the bigger worry for Super Micro is whether customers and suppliers start to bail.
Aside from the compliance problems, Super Micro is a fast-growing company making one of the most in-demand products in the technology industry. Sales more than doubled last year to nearly $15 billion, according to unaudited financial reports, and the company has ample cash on its balance sheet, analysts say. Wall Street is expecting even more growth to about $25 billion in sales in its fiscal 2025, according to FactSet.
Super Micro said last week that the filing delay has “had a bit of an impact to orders.” In its unaudited September quarter results reported last week, the company showed growth that was slower than Wall Street expected. It also provided light guidance.
The company said one reason for its weak results was that it hadn’t yet obtained enough supply of Nvidia’s next-generation chip, called Blackwell, raising questions about Super Micro’s relationship with its most important supplier.
“We don’t believe that Super Micro’s issues are a big deal for Nvidia, although it could move some sales around in the near term from one quarter to the next as customers direct orders toward Dell and others,” wrote Melius Research analyst Ben Reitzes in a note this week.
Super Micro’s head of corporate development, Michael Staiger, told investors on a call last week that “we’ve spoken to Nvidia and they’ve confirmed they’ve made no changes to allocations. We maintain a strong relationship with them.”
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports7 months agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Environment1 year agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Sports3 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business2 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway