I’ve been following the FTX bankruptcy like a mouse in a cheese cupboard. Aside from bankruptcy lawyers, the clear beneficiary of this whole saga is Elon Musk because crypto Twitter usage must be through the roof if my own recent addiction is remotely indicative.
Some half baked thoughts as this saga continues to unfold, thoughts that I wrote in 30 minutes and are worth exactly what you paid for them:
I’m surprised that BTC and ETH – the ONLY two blue chips in crypto (and don’t let anyone mislead you into thinking there’s any other token that qualifies) – have held up fairly well, price-wise. Of course that may change before I even hit publish
SBF’s level of psychopathy is off the charts. Apparently the term “psychopath” is more accurate than “sociopath” because psychopaths have better emotional regulation and can appear more charming, whereas sociopaths are prone to rage and more erratic behavior. Perhaps SBF is transitioning now from psychopath > sociopath. I’m just a blogger what do I know
Prescription drugs are powerful. There’s a reason they’re “prescription”. And even with all that research and regulation, we still barely understand what they do to our bodies and minds. But it’s clear they’re doing something, perhaps quite powerful, perhaps quite permanent.
Crypto will survive and thrive in the long-term. Nothing fundamental has changed. This was a centralized failure, a massive bank fraud and trading scam. There’s a reason the two most mentioned comparables are Enron (a public corporation) and Madoff (a Wall Street investment fund).
Bear cycles are ALWAYS more painful than you expect. History never repeats, but it rhymes. In 2014-16, it was exchange failure and bitcoin clones. In 2018-2020, it was ICOs and China ban and regulatory fud. In this cycle, it’s comprehensive institutional failure – lenders, exchanges, and funds. Crypto has problems, many of them, and the criticisms are deserved. But the tradfi water we’re floating in is secured by a very fragile opaque aquarium. Swimmers beware.
The end game is approaching with accelerating speed, both in the broader global financial system, and for crypto’s own place inside it. This debacle will prompt hard questions and even harder regulations, but crypto continues its march towards global adoption and growing usage. The crypto tail increasingly wags the tradfi dog. Meanwhile the tradfi dog appears more and more sickly, limping behind its Central Bank owner.
Prices could dip another 50% from here, or we could see a massive wick up through some combination of a short squeeze, flight to quality (altcoins>BTC & ETH), Fed slowdown, and survivors’ euphoria. I don’t know. And if you have patience, it doesn’t really matter.