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FTX collapse sparks crypto crisis, but Bitcoin will definitely survive

Adrian Weckler


Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange. Photo: Ting Shen/Bloomberg

Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange. Photo: Ting Shen/Bloomberg

Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange. Photo: Ting Shen/Bloomberg

Another month, another crypto crisis. The collapse of the FTX exchange, taking some €8bn in customer deposits with it, has set a bomb off.

Gemini, the Winklevoss twins’ crypto exchange which 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 having issues. Panic seems to be around the corner.

Bitcoin and ethereum, the biggest and “safest” cryptocurrencies, have lost almost three quarters of their value in the last year.

Non-fungible tokens (NFTs) are collapsing. The ‘Bored Ape’ NFT that Justin Bieber spent $1.3m (€1.26m) on a year ago is now worth $69,000, a loss of about 95pc.

What must the purchaser of Beeple’s $69m digital art NFT – a jpeg backed by a claim of blockchain ownership – be thinking right now? And how smug might Beeple (real name Mike Winkelmann) be feeling?

Recriminations, blame and lawsuits are now rising. In the US, celebrities such as 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 have their moment. Sam Bankman-Fried, the 30-year-old shorts-wearing, video-games-playing caricature behind FTX, has given them more ammunition than they could ever hope for.

Bankman-Fried treated customer deposits of billions of dollars like a Deliveroo order.

He leveraged a genuine talent at making millions from Bitcoin into billions of funding and deposits for a business that misused and bet his customers’ funds away.

Becoming a paper billionaire along the way, he went on an egocentric spending spree over the last three years that would humble Larry Ellison. Bankman-Fried paid $135m to secure the long-term naming rights for the Miami Heat basketball team’s stadium (now called the FTX Arena).

He funded US politicians (mostly Democrats) to the tune of millions of dollars. He made an estate in the Bahamas his headquarters.

Even Elon Musk – current holder of worst-ever overpayment for a tech business – thought the whole thing smelled dodgy, as we know from newly-released text messages of Bankman-Fried approaching him for billions in funding.

But the crypto gold rush, given extra energy by greed and a lack of money-making opportunities in the low interest rate environment prior to 2022, overlooked all of the red flags.

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FTX CEO Sam Bankman-Fried. Photo: Reuters

FTX CEO Sam Bankman-Fried. Photo: Reuters

FTX CEO Sam Bankman-Fried. Photo: Reuters

Bankman-Fried’s habit of playing video games while on critical business conference calls was a Gen Z cultural quirk, the enigmatic behaviour of an unconventional genius. Letting his girlfriend run billions in crypto bets was not considered a deal-breaker.

The result is the worst collapse in crypto history, with relatively little regulatory input or oversight that customers could depend on.

Now that he has helped to crater an entire cycle of crypto confidence, is it time to look even more sceptically at what the whole thing represents? Is there any case at all left for crypto or crypto derivatives like NFTs?

No, say traditionalists: it is, was, and always will be, a big makey-uppy scam. This corner of opinion has some highly credible proponents, including Ireland’s Central Bank governor and JP Morgan boss Jamie Dimon.

But the problem with writing off crypto altogether, even at a low point like this, is that it doesn’t acknowledge a hard reality: millions of people believe in its long-term value.

I mean over and above that mate you have who throws a few quid into LOLcoin, after putting a tenner 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 teetering on collapse and has two years’ worth of sardines and milk powder stored in his attic.

There really are quite a lot of people who fundamentally believe blockchain-certified, mathematically limited cryptocurrencies are inherently valuable assets that are worth something and always will be.

You can argue with them that this logically shouldn’t be the case, that it’s mostly unregulated and they could lose it all in a single week’s collapse (like we’re seeing with FTX).

You can also point out all the facts about the vague, non-transparency around the origins and key stakeholders in most big crypto assets. Or the basic questions over why a recently made-up maths equation should suddenly be worth anything. Although as makey-uppy sources of value, let’s not bring up gold.

But you’re not really changing the cold reality: a market valuation reflects the interest and confidence a number of people have.

Even in the current doldrums, Bitcoin is still trading at €16,000 per “coin”. That market is made up of more than a few hucksters trying to make a fast buck from a junk stock.

For clarity, I don’t own crypto. I certainly don’t trade it. I don’t like the dynamics around it and don’t fully trust its institutions. But it’s an indulgence to let a bias like that interfere with what I see and hear. I don’t think crypto looks like dying anytime soon.​​​​​

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