exchange once seen as a trustworthy oasis in a sketchy industry, is ricocheting through the crypto sector at alarming speed, sending the prices of multiple cryptocurrencies plummeting and raising serious doubts about the business model for all crypto assets.
Until Tuesday, when FTX announced the shocking news it had signed a letter of intent with Binance for a potential takeover, Mr. Bankman-Fried was often hailed as the industry’s golden boy – someone who got extraordinarily rich off crypto and was willing to play nice with lawmakers in Washington. The problem now is that it’s much harder to know who can be trusted. The whole crypto sector was already wobbling, with two-thirds of its value, or US$2-trillion, evaporating in six months earlier this year. Now with the latest liquidity crunch – something that was never supposed to happen to FTX – the fallout is worsening by the hour.
Some of the industry’s biggest supporters are trying to shore up confidence. Late Monday, Som Seif, the founder of Purpose Investments, which launched Canada’s first Bitcoin ETF, tried to spin this as a positive for the crypto sector in the long run. “Because the crypto industry is so non-transparent,” said Dennis Kelleher, CEO at Better Markets, a lobby group in Washington, “it’s harder to know how deep the crypto collapse will be.”
Mr. Bankman-Fried also runs a separate crypto company, Alameda Research. No one seems to know if there was co-mingling of funds between FTX and Alameda, but the value of FTT plummeted over the weekend and it might have wiped out FTX’s safety buffer – similar to how a housing crash can wipe out the collateral on a home-equity loan.
Actually it reinforces the decentralized finance hypothesis.
Can't taper a ponzi.
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