Over the past week or so I’ve fielded a few inquiries about the situation with the crypto market and FTX. At one-point last year we built some trading models that we initially planned to deploy in the crypto space. We thought the opportunity was ripe at the time. However, as we did more due diligence, we halted all plans for a crypto launch as we felt quite uncomfortable with the regulatory framework across the market. We even communicated that with several of you over the past year. Several issues stood out to us which have now come to light with the downfall of the crypto exchange FTX. For one, FTX was the custodian of all the accounts which was quite strange to us coming from the futures market, which is the most heavily regulated market along with stocks in the entire world. The Chicago Mercantile Exchange does not hold any accounts – it’s just an exchange. You have clearing firms (Wells Fargo in our case) that handle all of that. Again, they are some of the most regulated entities in existence. FTX was not regulated by anyone hence why US citizens were not able to open an account on FTX, thankfully. It was a very strange situation given it was one of the largest crypto exchanges in the world. Again, it didn’t take us very long to figure out that this whole crypto market was built on a house of cards, and we even adamantly urged several of you to stay out of that market entirely. Long story short – we never moved forward in managing capital for others in that space because we deemed it much too risky. The lure of fast money and potentially massive returns was indeed very hard to ignore but most people get blinded to the risks involved with such things. Everyone wants huge returns and do not even think about risk. It’s unfortunate because those who did just that with FTX got burned badly.
Anyways, I just wanted to put this little note out because some have inquired why we never launched our crypto models. Now you know why! I hope you all have a very Happy Thanksgiving!