The FTX Indicator

Louis Sykes
October 6, 2022

From the Desk of Louis Sykes @haumicharts

One of our favorite anecdotal indicators is the classic magazine cover.

Journalists do a tremendous job of aggregating consumer and investor sentiment.

By the time these magazines and other features take time to plan, develop, and eventually publish their covers, they're always going to be late to the party.

That time delay often presents a prime opportunity for investors.

Similarly, ETF providers also give us a wealth of sentiment information, particularly when it comes to ETF launches and de-listings.

ETF providers have a hilarious track record of launching funds at the complete worst time while de-listing them right before things get going.

A classic example is the coal ETF that got de-listed right before the epic bull market in coal stocks just began.

In crypto, we have yet another insightful indicator, one I like to call the "FTX indicator."

It's become somewhat of a meme in the community that whenever FTX lists a coin, the coin is going to zero.

FTX knows that retail is always late to every momentum trade, so taking the other side of whatever token they list is always going to be an easy market to make.

Take a look at when FTX launched lumber perps; they quite literally listed them at the pico top.

More recently, FTX just launched the US Dollar Index perpetual futures.

Is this going to be a repeat of lumber?

One of the reasons Alameda Research is such a force to be reckoned with is because it has endless exit liquidity. If your coin isn't listed on a major exchange, you can't exit.

But Alameda has special relationships with most exchanges as market makers, especially FTX.

In this sense, the reason why these FTX launches so often mark idiosyncratic peaks isn't necessarily caused or indicative of stretched sentiment but is also directly impacted by large firms like Alameda fishing for exit liquidity.

Do you think I'm joking?

Let's go through some of them...

When FTX listed Media Network, it marched all the way to zero. It's a limit-only market on Coinbase because liquidity's bone dry.

Hilarious.

How about Gala?

FTX launched right at the pico top of the gaming craze.

It launched Ravencoin perps on the most recent pump, and it cratered.

Same for Flux.

When FTX launched Green Satoshi Token, it went to zero a month later...

FTX launched Stargate Finance right at the peak of this pump.

Another case of FTX feeding into trader sentiment by launching IOST perps into the pump.

It's never come back...

How about JasmyCoin perps?

Launched on the pump and never recovered -- are you seeing a pattern here?

Ever since FTX launched Sperax, it fell into a 98% drawdown.

There's more than likely a whole lot more going on here than just basic sentiment unwinds. But these listings have become such a timeless indicator in crypto that there's an unironic edge in fading these launches.

If you've been in crypto long enough, you'll learn that there are three certainties in life: death, taxes, and your coins going to zero when they're listed on FTX...

Thanks for reading, and please reach out if you have any questions.

Follow Louis Sykes on Twitter @haumicharts

 

 

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