Another month, another crypto crisis. The collapse of the FTX exchange, which brought about 8 billion euros in customer deposits, set off a bombshell.
emini, the Winklevoss twins’ crypto exchange that recently opened its doors in Ireland, has already “paused” withdrawals on some accounts. That’s because Genesis Global Capital, the fund that backs some of Gemini’s accounts, is now struggling. Panic seems to be around the corner.
Bitcoin and Ethereum, the largest and “safest” cryptocurrencies, have lost nearly three quarters of their value in the last year.
Non-fungible tokens (NFTs) are collapsing. The “Bored Ape” NFT that Justin Bieber spent $1.3 million on a year ago is now worth $69,000, a loss of about 95 percent.
What must the buyer of Beeple’s $69 million digital art NFT — a JPEG backed by a blockchain ownership claim — think now? And how smug could Beeple (real name Mike Winkelmann) be feeling?
Accusations, finger pointing and lawsuits are now increasing. In the US, celebrities like Larry David, Tom Brady and Shaquille O’Neal are being sued for promoting FTX – David starred in a Super Bowl ad for the collapsed crypto exchange.
And we’re all back to the core question: is crypto a made-up Ponzi scheme for crooks and suckers, or something with long-term relevance?
Right now, the naysayers are having their moment. Sam Bankman-Fried, the 30-year-old shorts-wearing, video game-playing cartoon behind FTX, has given them more ammunition than they could ever hope for.
Bankman-Fried treated billions in customer deposits like a Deliveroo order.
He used real talent to turn millions of bitcoin into billions in funding and deposits for a company that misuses and bets on its customers’ funds.
For the past three years, while en route to becoming a paper billionaire, he has embarked on a self-absorbed buying spree that would humiliate Larry Ellison. Bankman-Fried paid $135 million to secure the long-term naming rights to the Miami Heat basketball team’s stadium (now called FTX Arena).
He funded US politicians (mainly Democrats) in the millions. He made an estate in the Bahamas his headquarters.
Even Elon Musk — the current owner of the worst overpayment ever for a tech company — felt the whole thing smelled dodgy, we know from newly released text messages from Bankman-Fried pitching him about billions of dollars in funding.
But the crypto gold rush, fueled by greed and a lack of money-making opportunities in the pre-2022 low interest rate environment, missed all red flags.
Bankman-Fried’s habit of playing video games during important business conferences was a Gen Z cultural quirk, the enigmatic demeanor of an unconventional genius. Letting his girlfriend run billions in crypto bets wasn’t seen as a deal breaker.
The result is the worst collapse in crypto history, with relatively little regulatory input or oversight for customers to rely on.
Now that he’s helped scratch an entire cycle of crypto trust, is it time to look even more skeptically at what it all represents? Are there still arguments for crypto or crypto derivatives like NFTs at all?
No, traditionalists say: It is, was, and always will be a major makeup scam. This opinion site has some highly credible supporters, including Central Bank Governor and JP Morgan chief Jamie Dimon.
But the problem with completely writing off crypto, even at a low like this, is that it fails to acknowledge a harsh reality: millions of people believe in its long-term value.
I mean in addition to that buddy you have throwing a few pounds into LOLcoin after betting a ten on the 3.30 at the Curragh because they heard Musk might tweet about it. And I’m not talking about your conspiracy theorist uncle who thinks the world is about to collapse and has two years’ worth of sardines and milk powder stored in his attic.
There really are a fair number of people who fundamentally believe that blockchain-certified, mathematically-constrained cryptocurrencies are inherently valuable assets that are, and always will be, worth something.
You can argue with them that logically it shouldn’t be, that it’s largely unregulated and they could lose it all in a single week of collapse (like we’re seeing with FTX).
They can also point out all the facts about the vague opacity surrounding the origins and key players in most major crypto assets. Or the fundamental questions as to why a newly invented math equation should suddenly be worth something. Although we shouldn’t mention gold as a makeup source of value.
But you’re not actually changing the cold reality: a market valuation reflects the interest and confidence of a number of people.
Even in the current doldrums, Bitcoin is still trading at €16,000 per “coin”. This market is more than a few peddlers trying to make a quick buck on a junk stock.
For clarity, I do not own crypto. I’m definitely not swapping it. I don’t like the dynamics around him and don’t fully trust his institutions. But it’s indulgence to let a bias like this interfere with what I see and hear. I don’t think crypto will die anytime soon.
https://www.independent.ie/business/personal-finance/banking/ftx-collapse-sparks-crypto-crisis-but-bitcoin-will-definitely-survive-42158060.html FTX collapse triggers crypto crisis, but Bitcoin will definitely survive