As the larger exchanges collapse, it's also clear that many of these prices were simply invented. For example, it's pretty clear that FTX + Alameda alone invented at least a few billion dollars that simply never existed, but that were priced into BTC and others. Tether is almost certainly doing something very similar, as may be Binance and others.
And these are just some of the make-believe dollars in crypto. You then have all of the minor coins where someone buys one for a dollar and sells it back for two dollars, and someone else who had bought a thousand for a thousand dollars gets shown by some exchange that their funds doubled in value! And now they can leverage that to buy even more worthless coins, causing someone else to think their funds are increasing in value and so on.
It's all a house of cards propped up by savvy unscrupulous marketers.
Will BTC or ETH or Monero fall to 0 if the exchanges died? Probably not, as people actually do use them in some small measure (international payments with countries with failed banking systems, money laundering, evading sanctions, etc). But they would be back closer to where they were 10 years ago, a few dollars or maybe hundreds of dollars for 1 BTC. And most of the others would just die out.
I think you missed the point parent was making about the fraud of accepting money for $crypto_thing and not actually buying $crypto_thing and just moving the money to the Alameda hedge fund. All of that purchasing never impacted the prices of $crypto_thing.
The other thing that will be interesting is if they uncover fraud around $crypto_things that were supposedly tracking actual SEC regulated securities as a derivative and if any Wall Street finance firms were using those FTX derivatives as part of their business.
As for how the scam worked, my understanding is different - my understanding is that they both bought the token you asked for AND lent the same money to Alameda (who would then go on to buy it's own crypto) - because much of the buying was happening from other FTX accounts, which didn't actually require the dollars. So the same dollars were getting reflected both in the price of the crypto consumers asked for, and again in the prices of the crypto that Alameda was trading.
> Furthermore, the current "bad crypto news" is still suppressing the BTC price.
This is a contradiction. The high price of cryptocurrency is based in part on intermediated (ETF-style) and leveraged long bets.
If everyone took your advice and kept custody of their own keys, the crypto space would be much less speculative. That's probably not a bad thing, but it would not obviously herald a return to high prices.
What determines the natural price that is being suppressed here?
Everyone who bought and held on to their bitcoins in their wallet instead of
storing the coins with a custodian (exchange or otherwise) is still in full
possession of said coins. not your keys, not your coins as the saying goes.
"Not your keys, not your coins" is viable only in some kind of libertarian fantasy. In the real world, regulated, insured custodial accounts are useful and available for pretty much every security available to individual investors... save crypto.
As you noted the overwhelming majority of money worldwide is stored very safely in custodial fashion so people can actually /do something/ with it.
As I've also noted before we're going to see a drastic uptick in the coming weeks/months/years of people losing access to all of their crypto because of the UI/UX challenges inherent with self custody. I don't think many of the people who are rushing out to buy a Ledger or otherwise move to a non-custodial wallet fully understand that unlike everything else in the world there is no password reset option or customer service number to call when people inevitably do what people do and make a minor mistake.
There is going to be a lot of heartbreak from people losing everything because of forgotten passwords, wallets getting hacked, etc.