Crypto is not done, short term, & long term opportunities

Mad and Frustrated

This one was a doozy, wasn’t it?

Let’s say you made a friend years ago and over the years he won your confidence to lend him money every time. You get great returns on the back of that. You also hear in the media that your friend is doing very well and hanging around with all the right people. But all this while, the reality is, that he was busy making plans to conduct the largest Money Heist and then blow the money on cocaine, hookers and parties. Wouldn’t you be mad and frustrated?

That is exactly how most of us feel right now. Mad and frustrated. Countless stories of retail, funds, institutions, everyone caught in this debacle, directly or indirectly. Especially this time, for the first time, I just feel…….”disgusted’. Sorry for the rant but you get how we all feel after putting in years of hard work. Just because of one bad apple.

The silver lining however is that the more experienced you get, the easier it is to control your emotions. You have been through so much in life and its experiences, that you know this shall also pass. You are a better guide to your community, colleagues, friends, and what is best for the industry that you have been a part of, for over a decade.

I know a lot of you have been impacted by FTX, and I want to send my best wishes to you. If you feel like talking about it, feel free to reach out to me or any other member of the team. Rising capital was fortunate not to have any exposure during Luna or FTX or any counterpart risk with any other parties. We continue to build with, and back outstanding web3 founders.


  1. A dark week for the industry. Probably the darkest so far. $30bn-$50bn evaporated effecting 5mn+ people
  2. Be careful of more dominos falling. Stay safe, keep in self custody till this passes
  3. There could be short term pain & more regulatory scrutiny. Perhaps that is a good thing for the long term.
  4. Crypto is not dead. There is a huge long term upside as developers are building amazing products with IRL use cases
  5. The non crypto-crowd that was on the edges – is not coming back for a long time. Not till the next mega narrative of bitcoin halving.
  6. Global macro could get better with easing inflation and easing FED. That could very well coincide with Bitcoin halving narrative next year by Q3/Q4 23’

FTX Dominos Unfolding

FTX collapse is a big deal—but it’s also just one piece of a much larger puzzle. And as we try to figure out where we go from here, it’s important that we take the time to reflect on where we’ve been so we can be ready for what comes next. A lot has been written and you can follow how events unfolded here –

The Shocking Collapse of the FTX Empire and Unpacking the endless FTX nightmare by Bankless, The Collapse of FTX by Kerman Kohli, and probably the best Definitive Thread non FTX by Jason Choi

Mario @ The Generalist has a great piece on how all of this is a casino. To the outsiders and non crypto believers, we were already gamblers running a 24/7 casino in Monte Carlo. Turns out, it was not Monte Carlo. It was the Bahamas all this while with some 20-30 year olds at its helm. But he ends with some beautiful lines:

Stay calm when you see others on a winning streak, and question those that seem unable to lose.

And, somehow, do not let this jade you completely. 

Leave the casino if you want to, but if you are going to stay, stay with those that believe in something, in miracles. Not the ones where statues weep and a piece of toast becomes a Pietà, but where the sum of human knowledge travels by light and computers can paint and money moves like water. Because what is a true miracle except for unexpected technology? 

There is a lot that will unfold in the coming days, weeks and months. What is more important is that you need to step off the gas for a bit and reflect on what went wrong? Personally, I have not been hurt. Neither has Rising Capital. But this comes from experience. Of losing faith (and money) back in 2015 & 2018. Once bitten, twice shy. I learned very quickly that no one really knows anything and there is no one to be trusted anymore with mine or my firm’s money. Also there is always an element of luck so I thank the Almighty everyday for keeping it calmer for us in these trying times.

3 Things I Learned from FTX SBF Mess

First we had the 3AC/Luna/Celsius led collapse back in July and now this. No one can put an exact value to the miseries that retail as well as institutional have suffered this year. But some overarching lessons learned from this:

  1. This is a nascent industry and despite best intentions, you will always have bad actors with rug pulls, daily scams, 3AC, Luna, FTX collapses, hacks etc. You have to be prudent. This is no different from TradFi – Enron, Madoff, Bear Stearns, Lehman etc. Human greed will always pop its head up. When someone is trying to oversell, be cautious. Better to lose that opportunity or little money, than to get your safe emptied by a con. There are several who start with high principles of decentralisation but in the end many just give up – either they have made enough money and don’t care to supervise or they are inherently crooks.
  2. While crypto is being blamed for everything – in fact it is centralisation that failed. This gives more power to decentralised businesses and entities. For example, I would rather trade on Uniswap than on Binance unless absolutely necessary. It is not crypto, it’s the culture that has become toxic. First we promote wild behaviour, almost worshiping it (Su, Kyle, Sam, Alex M etc etc) and then we expect normies not to blame us. Seriously?
  3. If you are a project, don’t lie about your tokens or treasury. If shareholders and investors are repeatedly asking for proof of assets, invoices, accounts and forward budgets, work with them to provide them (See below warning signs via Chamath). Don’t ignore or delay those. People are ready to forgive and forget. But doubling down Will always end up in tears.

Then Why Are You Still Here?

Have you ever wondered why we’re still here? Why are we staying long crypto and holding our long-term holdings of BTC & ETH? Why are we continuing building and supporting passionate builders?

I have, too. And I’ve come to the conclusion that some bad apples cannot destroy a revolution and this presents a massive opportunity that is so evident.

So, what can we do about it?

  1. Builders continue to build. I have never ever seen so many builders together like in Token 2049 here in Singapore. People who know what they are talking about and more developers from traditional businesses who are building for IRL use cases, infrastructure to connect that and not some Ponzi pump and dump.
  2. Crypto is a part of our daily lives in many parts of the world, from traders in emerging nations to payments in El Salvador and Brazil and gamers in web3 etc. This is an established asset class now. This impact is not going anywhere and its growth is inevitable.
  3. So many of the smartest people I know are associated with crypto, and that means something. It’s not just about being a degen; it’s about being a great forward thinker. Some of the smartest traditional finance companies in the world have joined in. Crypto and code has the potential to change how we can change the world from corrupt central figures to digital savvy humans. Web3 will change our lives for ever. My belief is stronger than ever.

Rebuilding from here, what’s next for crypto?

There is no doubt that even the best have been shaken by FTX saga. Besides personal & institutional monetary losses, but what it means for the industry’s future? Like many of you, I keep deliberating a lot as to what happens next and what does it all mean for web3 in the long term. What will bring mass adoption in light of this FTX debacle. How do we convince non crypto outsiders to come back in? More importantly, how do we continue to support builders who are genuinely working on the longer picture and not just quick exits?

In my mind there will be two distinct categories that will emerge as we move ahead – Regulated Centralised & Fully Decentralised. Yes there will be hybrids in between who will try to squeeze here and there, but eventually trust (and customers by definition) and credibility will force all of them to take a side. Either you are under proper preview of regulators, or you are governed by code of law. But this will not be a straight forward journey. Some thoughts on how things will pan out short – medium to long term.

1. In the short term (3-6 months), few immediate things come to mind:

a) More regulatory scrutiny by every regulator around the world. FTX Int’l has irked every regulator to be ultra courteous about crypto. Smart money, wealthy connected individuals and state funds have been equally burnt along with helpless retail this time. But perhaps, that is a good thing for crypto. For the centralised avenues that is very much required. Had SEC or CFTC been more clear or some regulator in Asia or Europe supported this industry properly, we would have more of Coinbase, Kraken, Anchorage than FTX, Luna or 3AC. Mistakes will still be made and Madoffs and Enrons and Sam’s will always be there for their individual human greed, but the majority will fear the law and not run recklessly.

b) Decentralisation will become even more powerful. A much required move to DApps / protocols / self custody will become the most important theme. Eventually, as the web3 infrastructure improves, the user experience gap between self-custody and storing assets on centralized entities will shrink. More users will feel comfortable self custodying their assets in software they control and managing the keys that provide access to their assets themselves. This is how many web3 users interact with decentralized applications, like NFT marketplaces, today. – AVC by Fred Wilson

c) Increased Diligence – We are entering a very lean holiday period. Investment activity will dry up for the next 45 days. But when investors come back in January, there will be more diligence, more scrutiny. First question you will get from VC’s and investors is not “where do I sign please” but “show me the proof of your custody” or “how do you manage your treasury”? What tools do you use? Are you self-custodied? Are you fully decentralised or going to be? If not, are you centralised? Where are you based? Do you have a license? From where? etc etc.

d) Demand for Infrastructure companies around verification, proof of reserves, KYC/AML, API/SDK to prove your on chain status etc will become more important (and hence more funded), vs centralised apps & Dapps.

e) Contagion and pain spreads as there are more skeletons in the cupboard and I believe there will be more pain as every crypto as well as non crypto participant becomes super cautious of entire industry. At least in the short term, we shall see some more dominos fall. Here is a list that has been circling so far and we cannot guarantee its authenticity.

The bottom of the S&P 500 during the 2008 Global Financial Crisis wasn’t reached until March 2009. While I am supremely bullish on the prospects of crypto in 2023 (I know the date keeps slipping, but I reserve the right to change my mind in the face of market conditions), I believe we are about to trade to new lows as everyone wonders which crypto household name will go bankrupt next for lending money to FTX / Alameda. – Arthur Hayes

f) Liquidity lost, upside limited for now: Many market makers would have taken a hit. Apparently Alameda took the largest hit in July but it only came to light now in November. Who are the other ones to keep an eye on – everyone I guess at this stage. Their customers, counterpart, quants, intermediaries and every service provider will be shying away from leaving any deposits with them right now. And they will be shying away from making markets on these centralised avenues. This will take months to really know who is swimming naked and who recovers from here. This puts a dent in the liquidity / market making books and that in turn puts a lid on any material upside from here.

g) Solana & its ecosystem coins will take some hit. Both retail as well as devs associated with SOL projects are already considering a move elsewhere but only time will tell how sound Solana management is, do their die hard VC’s pump in more money into Solana and how they can support their ecosystem projects and many have lost money and faith.  

2. In medium to long term:

a) There will be negativity from the media, politicians and non crypto audiences forever. They will always bring out FTX in every conversation. Negative headlines will be used in political speeches. What they would not admit is that it is the centralised part that failed. And we agree that it must be regulated. The builders are building passionately. That hasn’t stopped. At Rising, we will always continue to support these brilliant founders who are genuinely changing the landscape of this industry. There is a huge long term opportunity and we are not prepared to miss it.

b) Regulatory pressure and compartmentalisation: This one stop cowboy shops will have to separate via Chinese walls just like traditional banks. Custody, OTC, clearing, trading, lending, settlement etc will all become separated. A sleuth of on-chian and off-chain proof of reserves & liabilities will become second nature. This presents an opportunity for infrastructure devs to build these capabilities as intermediary nodes or analysis tools to qualify these. There will be stricter rules for these entities as they mature – reserves, audits, risk management, especially if you are retail facing.

c) Centralised trading is not going anywhere but will see participation from larger institutions and banks who have been preparing for such an event (JPM, GS, DBS, Fidelity etc). Many customers and hedge funds that were sitting on sidelines, see this as a chance to redeem. But they will only trade with regularised banks / institutions. That is when the next bull season starts again.

d) The bright spot is that ETH and several AltCoins didn’t have a free fall either. It could still happen but decentralised infrastructure worked perfectly as it was supposed to (UNI, AAVE etc). Means buyers have not lost faith totally. It’s not the “death of crypto”. Keep that in mind and go back to your buyers list if you made as we spoke in last months Rising newsletter.

A word on global macro

Unfortunately, none of this positive global macro matters for crypto as we are in our own gutter for now. What an unfortunate timing.

Some thoughts and observations on macro situation however:

1. While the headline inflation was at 7.7%, the monthly pace of 0.27% for Oct was the lowest monthly print since mid 2021. Stocks and bonds rallied globally amid amid expectations of lesser tightening by FED in the future. That is good news but core CPI components are still running higher leaving room for FED to continue tightening, for at least 2 more quarters, if not more. However the pace of tighteming could slow from 75 bps. Expectations are for a 50bps hike in Dec & 25bps in early 2023. That is what the market is wishing for – a clear easing direction, and rallying in anticipation. Wish crypto was not doomed by SBF at this point.

Source – Bloomberg ECAN

2. While many funds are rushing to cover their shorts as inflation numbers are a tad better, I don’t think we are out of the woods just yet. You could take small size and small term positions, with tight stops but that is it. Inflation has some room to go, albeit now going in the right direction but many things need to work concurrently for FED to even dream of a pivot. Everything could well easily reverse, so time to hold your horses for now.

3. However, FED will have to stop / pivot at some point as interest on their public debt is also rising along with rising interest rates but inflation should come off first. We expect that is already starting to happen with weaking housing and wages markets. If we see inflation below 7% in December, we are set for a rally for the end of the year. Alas, crypto wont be there 🙁 to celebrate together.

4. FED pivot is largely slated for around Q2 unless some other geopolitical swan emerges. Bitcoin halving narrative shall also start building up closer to Q3/Q4 nd we shall start to see a larger recovery in crypto then. Till such time, it is very difficult to say how correlated we stay to global macro as many more headwinds await crypto for now.


Crypto is not dying.

Yes it’s a setback like never before but with so many builders building amazing products and infrastructure the future of this industry is very bright.

Play to your strengths. Focus on where you can to add value to the ecosystem. The one who aggressively works for next 12 months, will be the clear winner.

Global macro will improve by middle of next year. Coupled with better geopolitical situation and a rising Bitcoin halving narrative by Q3/Q4 next year, that should start to push entire crypto complex, materially higher again.

But you need to prepare yourself for such opportunities and that is where Rising Capital is always looking to support builders. We are not done. This industry is not done. If you need support in any shape or form, reach out to us at

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