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As soon as I see Justin Suns’ name in the headlines it eminently pops up warning sounds and red flags in my head. But let us look at this, maybe this time it will be different. Maybe this is not simply his latest “get rich scheme” but truly something that is done to help the community.
During the Merge, Sun announced that he would back the Ethereum PoW form, and was ready to put billions of his $ETH to support the development of a new ecosystem. The $ETHPoW fork then came. But just like magic, there was a third fork of Ethereum as well. Sun had gotten second thoughts. And instead of supporting the Ethereum PoW fork, he for some reason instead made his own fork. Most likely leaving both fork words for wear. This is the latest time Sun was involved in a project, to my knowledge at least.
Sun was reportedly devastated by the recent events. And he and his team went to work to try and help “their users”, meaning holders of $TRX, $BTT, $JST, $SUN, and $HT coins and tokens. The deal that emerged was Sun would help facilitate a 1:1 exchange. This meant that if you held a $SUN token on FTX. Now you would be able to swap that token for a token that was not on FTK. Meaning you now would get your crypto back.
This was truly an awesome thing. Something that truly only could be done by someone who possesses a good heart, right? Right? Disregarding the very valiant, and possibly self-serving, “protect our users” part. Let us look at the deal and its effects.
The first thing that happened was that all the affected crypto spiked in price FTX. How bad you ask, well $TRX momentarily traded for $2.5, compared to the outside price of $0.05–6. This could hardly come as a shock to anyone. If you open a door to a room full of people, people who think they are left to die in that room. Of course, they will scratch and claw their way to try and get to the exit. It is basic survival instinct.
Ok, you might say. But how is that anything that would matter? People now can get their crypto out of the platform, and that ultimately is a good thing, right? Yes, if we look at it from an individual perspective. A person had crypto on FTX, these cryptos were now locked away, presumably lost forever. Now that person is able to get some of that crypto back, at a premium. But logically the premium does not matter, because having some crypto, even if it is only a small amount. Would logically be better than having no crypto.
It all is very reminiscent of a psychological experiment called The Dictator Game. In this experiment one person, the Dictator gets a sum of money. They get to decide how much, or how little, of the money to share with a stranger. The caveat is the stranger gets to decide if they accept the deal, then they both get the allotted money. Or they can refuse the deal. Then both get nothing. Looking at it from a completely logical perspective, the stranger should always accept any deal where they get more than $0. This is because any amount of money would mean they now have more money than before.
However, humans are very rarely purely logical. If we were where they would be no reasons for Volcans to exist in Star Trek, now would it? Instead, everyone would be Volcans, minus the other alien races, and every Volcan would be what we are now. The result of the experiment is that very few people accept a deal where they get “less” money. People rather chose the option of no one getting anything.
Back to FTX. Currently, $TRX is trading at 600% higher on FTX than outside of FTX. And I assume the others are traded at a similar ark up. This means that if you want to get your crypto out of FTX you have to take a 6:1 loss. Meaning for every $1 you can get out of FTX means you spend $6 in FTX. The $5 loss in value is what is called an Arbitrage. But this $5 just does not disappear, it has to go somewhere.
Why speculation station, well this is simply because non of this has been confirmed. And possibly never will be. But with that crazy high arbitrage one would either assume that FTX is looking to get themselves out of their billion-dollar hole off the back of their customers. Or Justin Sun has struck a deal with FTX where they share the arbitrage to some degree or another.
My money is on the latter. This is simply because FTX and Sam Bankman-Fried are in a very dire situation. Their previous only way out, the deal with Binance, fell through. No other deal has been found. This is despite reports of SBF courting everything and everyone. And with the very real future of legal actions against FTX and SBF. The only deal that was left was seeming to deal with the devil. this now, if we harken back to the dictator game again. This means that not only does Justin Sun have the money, but he will also be able to dictate the division or the deal. He also has what is equivalent to a gun to the head of SBF.
On the last day, reports have emerged that some other funds, is certain regions like the Bahamas, have been able to be withdrawn. This might be because SBF is using its arbitrage portion to try and make as many whole again as possible. But it might very well also be that SBF is trying to mitigate the legal fallout by simply paying out everyone in certain regions. Rather than having to face legal actions there as well. But he might also be trying to buy back some lost goodwill for the legal trouble he will be facing.
While the jury very much still is out of the room on SBF, personally I am having a very hard time seeing Sun doing this without raking in a ton of money as well.
I would like to hear your opinion on this Sun FTX deal. Do you think I am way too cynical, or perhaps not enough cynical? Please sound off in the comments down below. If you have found this post informative or entertaining. Please consider following me, and reading some of my other posts or why not do both?
See you on the interwebs!
Picture provided by: Screenshot from https://www.youtube.com/watch?v=DUhBTrqrXro&t, https://coinmarketcap.com/,https://ftx.com/trade/TRX/USD
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