In today's edition of YIYL, (You Invest, You Lose) we take some time to remind ourselves that the gold rush into bitcoin and shitcoins brought in a lot of institutional money this time around. Considering the bitcoin market cap peaked at 1 trillion and shitcoins combined close to 3 trillion you can imagine how many investors thought they found a new source of alpha and this rocket ship would keep going.
Sadly that's not how this works, retail investors like myself who have been here for a while know the ups and downs and prepare for them, while newbies are going to make the same mistakes we made in previous years it's just how the process works.
This is not going to be different for institutional money, and we saw plenty of companies go bust and take their LPs down with them, LPs like pension funds for example, in the form of Celsius and FTX.
While most of the news focuses on the bigger markets like the US, there were smaller regional players that got into the space and also got over their skis, notably one in the Swiss Alpes. Zug has emerged as a sort of crypto capital in the country with several shitcoin companies calling it their base, and while it was Rosey early on, it ain't looking so good now.
Just before the holidays, employees of the Covario crypto broker based in Zug, Switzerland learned that their employer was no longer solvent.
Clearly this news was kept under wraps to keep operations going and keep people calm, while a salvage job was going on in the background. According to reports attempts to secure a buyout had been unsuccessful, and the company is entering bankruptcy.
The firm didn't just keep things quiet on the solvency front but actively tried to convince clients and staff that everything would be hunky dory. They had attempted to keep up appearances by spending lavishly and even opening new offices several weeks before entering bankruptcy.
Maybe they could have used that capital smarter and extended runway or at least paid their staff, how pathetic can you be, but really it is a reflection of the sorry state of crapto companies. They're all run by a bunch of clowns who mistake brains for a bull market and when the tide goes out so does whatever they thought they knew.
It turns out that employee pension contributions had not been being paid since early summer. Employee salaries had not been paid since October.
If you haven't been paid for 3 months and your company tells you they're calling it quits in December, I am pretty sure you're having a shitty Christmas and new year.
If you take a look at google maps you'll see they're marked as closed now, lol 🤡 all I can say is nature is healing and we're seeing who has the brains and the backing.
I keep saying this but we're not over yet, borrowing costs continue to rise and debts continue to compound, banks and LPs aren't willing to invest when they can secure a sweet risk-free 4% and as long as that goes on, liquidity will dry up.
There will be very few bail outs in the shitcoin market, because nothing is worth saving in this space and we will continue to see more names added to my growing obituary.
Stay tuned for more, and as always hold your own keys!
Sources:
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