FTX is really no separate phenomenon than the underlying crypto industry itself.
The entire space rests on the metrics generated at the whim of perhaps a hundred or two extremely (crypto-)influential individuals who are all affiliated with one another and whose incentives and behaviors are highly correlated even when that affiliation is weak or antagonistic. I'm referring here to the large established miners, both public and dark (i.e. bot farm based, corrupting gov. officials, etc.) As well as the pools that they pretend not to control, and to a lesser extent the operators of the larger exchanges - although they are not nearly as free to move in recent years as the miners still are. It's no accident in miners are extremely publicity shy.
This group, which behaves like a cartel so it's reasonable to think about it as one, self-generates nearly every metric used to determine the size and depth of the entire industry. The fees and other costs to create fraudulent statistics would be impossible for anyone who is not a miner to swallow, but if you're mining at scale there is an enormous discount - because an inverse scale fraction of those fees are paid to yourselves.
Transaction volume, price, number of nodes, number of accounts, velocity of funds, everything that is used to construct a picture of the real human interest in this market via the lens of virtual numbers that describe it is completely under the control of a few people. Although some of them are more regulated today than they were in the past, for a good part of a decade there was effectively no oversight into how any of these operations worked, and they were free to openly front run the market, buy electricity at substantially corruption-reduced cost or just outright steal it- and again in the early days this paid off extraordinarily well because early large block rewards could be sat on and held until they bubble-appreciate several thousand of percent above acquisition cost.
when you're paying reduced (or nearly zero) cost for your production infrastructure you don't need to sell all of your product right away, and you thereby accumulate a future war chest to create a market 'bottom' anytime liquidity gets a little bit too loose for your liking: simply slow-roll selling new block rewards and voila, price stabilizes. Your carefully managed low public profile lets the media and public fill in their own self-serving explanation, which is that the public must be crazy about this stuff it cant stop buying it.
FTX were definitely the most polished fraudsters and hucksters in the crypto community. That's saying a lot, given that the finest fraudsters and hucksters in the world competed to out-swindle, out-cheat, and out-hoodwink each other daily in the crypto community
But that has nothing to do with cryptocurrency. Cryptocurrency is math, code, and gigawatts
To be fair, FTX isn't a result of crypto being unregulated. Operating an exchange is regulated to some extent, but this is a story of failed corporate governance amongst many other things.
FTX isn’t DeFi. I think you’re conflating centralized entities building on top of crypto (which should be regulated the same way banks are due to multiple historical crisis created by shady banking) and DeFi which are much more transparent in how they operate (by design)
FTX was one of a biggest crypto exchanges (think - stock market), ran by bunch of smooth talking friends/lovers, who were more interested in playing games and Harry Potter than running a company.
They amassed hundreds of millions of dollars in investments, from serious companies (who were impressed by their recklessness) and billions of dollars in deposits from customers. They donated millions to politicians and spent even more on ads (including Super Bowl). They stole those money, and partially pocketed it/moved it to their hedge fund (which they managed on a principle of “you don’t need to know math or finance” and “risk management is dumb”) that lost majority of it and triggered their fall.
They did all of that, while being run with less financial and corporate discipline than a neighborhood dog walking business by a teenager.
Not sure about that. I didn't even knew FTX existed. Alt coins the drama surrounding them are too high volume low impact. But I always thought of crypto as gambling with extra steps. I think that most people in crypto know the ropes by now.
Agree about FTX, but much of it was unsurprising to those paying attention, and that wasn't merely fraud about Crypto, that was an epic failure on the part of a few of the world's preeminent investors.
>but thats just cash
I'm not sure what you mean by this, can you elaborate? Every estimate I've found is very poor quality data, and I'm happy to pick apart any. It's similar to the energy use estimates which are equally poor and often miss vital distinctions.
FTX is just one input. Seeing that Crypto.com has 20% of their reserves stored in a pointless sh-tcoin (SHIB) is just further proof that people running cryptocurrency exchanges are idiots or greedy fools.
One or another variation of this story has played out many times already. Then the whole sand castle crumbles, and a lot of fake money gets wiped away.
The entire cryptocurrency space is just an unregulated gambling arena. There may be some solid, well-intentioned efforts within it, but they are completely overshadowed (and overcapitalized) by the purely insane gambling ones.
Please understand I am not trying to be dishonest or make arguments in bad faith. Maybe I need to be further educated.
I understand that the level of fraud committed specifically by FTX goes far beyond simply misleading lenders and regulators about their collateral which consisted mostly of their own crypto. In general, however, this seems to be the root of the issue and the systemic problem across all centralized crypto exchanges.
From the start and well prior to this conversation I have had the belief that Crypto "scams" like this bear a striking resemblance to the world of traditional finance and specifically the securities market and MBS.
I'm not trying to argue in bad faith or use any kind of argumentative tactic or fallacy (at least not intentionally).
It's hard at this point for me to not blame crypto-the-technology and crypto-the-culture for the repeated and spectacular failures of crypto-the-industry. It's not like FTX was an isolated incident. It's becoming sort of a scapegoat for crypto enthusiasts because it was such a big deal, but practically everything that has come out of the crypto space since Bitcoin and Ethereum has been a grift to some degree or another.
Something about crypto quickly and irreparably drew the get-rich-quick crowd, and I don't think there's any coming back from that. Where that kind of person gathers, scams abound.
FTX WAS a corrupt bank/betting parlor. Cryptocurrency is about self custody and full transparency. This is what blockchains allow. FTX was people depositing money in SBF's personal piggy bank. FTX has nothing to do with crypto, other than the fact that it allowed people to bet on crypto prices.
FTX has to be one of the most ubiquitous names in crypto at this point, most recently seen by everyone on the jerseys of umpires in the World Series. I can't even imagine the kind of fallout from this if it keeps heading in this direction.
This seems a bit like a "doth protest too much" article -- while the things FTX did are no doubt shady, this article seems to be trying to heap scorn on FTX as if it is unique in the cryptocurrency space. (And there are factions within that world -- is FTX in a different faction than Coindesk? I'm not sure.)
It seems quite possible that a couple of years from now we'll find out that most major cryptocurrency companies were doing things similar to FTX. With that possibility, this article could be an attempt to avoid FTX bringing down other companies in the space.
The entire space rests on the metrics generated at the whim of perhaps a hundred or two extremely (crypto-)influential individuals who are all affiliated with one another and whose incentives and behaviors are highly correlated even when that affiliation is weak or antagonistic. I'm referring here to the large established miners, both public and dark (i.e. bot farm based, corrupting gov. officials, etc.) As well as the pools that they pretend not to control, and to a lesser extent the operators of the larger exchanges - although they are not nearly as free to move in recent years as the miners still are. It's no accident in miners are extremely publicity shy.
This group, which behaves like a cartel so it's reasonable to think about it as one, self-generates nearly every metric used to determine the size and depth of the entire industry. The fees and other costs to create fraudulent statistics would be impossible for anyone who is not a miner to swallow, but if you're mining at scale there is an enormous discount - because an inverse scale fraction of those fees are paid to yourselves.
Transaction volume, price, number of nodes, number of accounts, velocity of funds, everything that is used to construct a picture of the real human interest in this market via the lens of virtual numbers that describe it is completely under the control of a few people. Although some of them are more regulated today than they were in the past, for a good part of a decade there was effectively no oversight into how any of these operations worked, and they were free to openly front run the market, buy electricity at substantially corruption-reduced cost or just outright steal it- and again in the early days this paid off extraordinarily well because early large block rewards could be sat on and held until they bubble-appreciate several thousand of percent above acquisition cost.
when you're paying reduced (or nearly zero) cost for your production infrastructure you don't need to sell all of your product right away, and you thereby accumulate a future war chest to create a market 'bottom' anytime liquidity gets a little bit too loose for your liking: simply slow-roll selling new block rewards and voila, price stabilizes. Your carefully managed low public profile lets the media and public fill in their own self-serving explanation, which is that the public must be crazy about this stuff it cant stop buying it.
reply