This last week has been a rollercoaster. I've been in crypto since a long time ago and have seen quite a bit, but this FTX implosion takes the crown. And to be honest, I don't think its over.
mtGox was so early in crypto, there wasn't any institutional capital or major players, mostly retail/regular folks experimenting with shiny new tech. FTX is an intermingled web of retail, institutions and big name investors as well as having their own investments, huge donations to politicians, lobbying arm, etc. The fallout from this will set us back for years.
I can’t imagine a series of actions that would be more destructive to the industry. The actions don’t make sense unless they were taken to maximize the potential fallout.
The deep regulatory and political connections are also interesting…
I think the idea that this is some kind of 4D chess move by regulators is a convenient way for the gullible idiots who believed in this stuff to put the blame on something other than their own credulousness. The guy basically admitted to running a Ponzi scheme. Why did you continue to trust him???
[1] https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
His actions since Alameda blew up were not rational, even if we assume that he was operating a Ponzi scheme the entire time.
He bailed out as many failed projects as he could and attempted to make investments with funds he did not have after the collapse of his ponzi started.
A ponzi operator who sees their house of cards collapsing is going to look for ways to get more money into the ponzi unencumbered with the hope that they can make back the losses before anyone notices.
They are not going to allocate what precious little capital they still have to investments that do not contribute more capital to the ponzi.
Yet this is exactly what SBF did.
It doesn’t make any sense.
Yet the regulation authorities are considering (that SBF literally authored) does very little to address the root causes of centralized exchange collapse, and is more or less designed to give power to regulators first and protect investors as a distant second.
What is needed are proof of reserves that include both assets and liabilities for centralized exchanges.
Centralized exchanges shouldn’t be able to lock up 100mm USD worth in customer Ethereum deposits for staking, when their exchange allows someone to buy that 100mm USD in ETH and withdraw it from the exchange before they can unlock the ETH and use it to fund the withdrawal without delay. If the exchange is going to allow customers to stake ETH on their exchange, the actual customers' ETH must be staked, and shouldn't be accounted for separately than the staked ETH deposit.
That is the core of the issue with centralized exchanges that play shell games with customer funds. They create financial risk if customer deposits are not backed 1:1 and mirroring the financial decisions of the depositor. Anything less is a ponzi, no matter how much window dressing is applied.
It's worth noting that banks are ponzi schemes, but they can borrow funds at the discount rate at will, and must meet capital requirements, so the damage their ponzi schemes can cause is limited. There is no lender of last resort in crypto. Centralized exchanges cannot behave like banks!
Also, SBF was a billionaire hobnobbing with politicians and celebrated by Forbes. Karpeles was some confused dev on his computer who loved his cat and wanted to build a coffee shop.
SBF's failure is going to have larger consequences outside the crypto sphere.
SBF just stumbled into money and spread it around, like the Oculus guy.
Anyways, through all this saga, I see ETH is still at $1200, which has held pretty well. I think the right price is around $600, how it was on Nov 2020, before all speculation. The rest of the price is just people playing around. But that's not what ETH is for, and these high prices are hurting it's real goal.
I'm definitely still holding crypto. Mostly ETH, because I believe in the core technology. I've done some smart contracts and have a couple ideas for the future.
But man, I surely hope all cryptos crash and burn this time, so that speculators stop polluting the technology.
Even people/groups using it for putatively useful purposes, those purposes often tend to be 10x more complicated or risky than standard financial mechanisms (or, they are using crypto specifically for various forms of money laundering).
Almost nobody cares about optimizing for real world use, just optimizing for "price goes up".
However I’ve grown less confident in ETHs longevity following the move to PoS. I’m concerned about the centralization of control and influence (eg transactions being dropped, tornado cash), lack of ability to withdrawal staked ETH, and general lack of trust created by the extreme number of scams. How do you view ETH long term, particularly wrt the proximity it has to these seemingly endless scams?
Why $600 and not $351, $17, or $15,000?
What fundamental reason is there for any specific price?
[1] https://www.arthurkoziel.com/generating-ethereum-addresses-i...
ETH provides value but it’s moved to an unproven model.
The who crypto ecosystem is filled with charlatans and crooks who want to rob you and your only other alternative is to be your own bank and store in a cold wallet. Not something normal people are interested in.
That process is not at all streamlined for the layperson, and the structure of crypto has only existed to make it harder, and to further divorce from what could otherwise be a straightforward process for 99% of folks.
Because any profitable trader will tell you just how stupid that logic is.