The collapse of FTX definitively proves blockchain’s legitimacy
Blockchain is a powerful and capable technology and as a viable asset class on par with many more established financial tools.
As more information emerges about the inner workings of FTX and Alameda Research, it becomes increasingly apparent that greed and human nature, rather than some flaw in cryptocurrency or blockchain technology, are to blame for FTX’s demise.
We don’t think Sam Bankman-Fried intentionally set out to commit fraud in the beginning, but it became endemic to the culture of his businesses. Alameda Research was churning out cash on trades because, in an upmarket, everyone is a genius. Then, when the market crash began, they had a couple of bad quarters and began fudging their data, hoping that things would soon recover. Then to keep Alameda afloat the decision was made to lend the company money using customer funds from FTX. Everything went downhill from there.
Anyone involved in fraudulent activity at FTX and Alameda Research should be brought to justice and spend the rest of their lives paying back those they stole from. In the near term, things don’t look good: the reputation of “crypto” and “Web3” has taken a hit, and it will take months to recover; those who held funds on FTX’s exchange stand to lose tens of millions of dollars. As seen in BlockFi’s bankruptcy filing, there will continue to be widespread market volatility in the cryptocurrency sector as investors reevaluate their tolerance for these assets.
While traditional investors are shaken by this event and using them as a “we told you so” moment the startups and developers that have been working behind the scenes are still creating companies that are stronger than ever. Corporations that believe in the future of web3 and the creator economy are still hard a work to deliver new opportunities for creators.
The magnitude of this occurrence demands that authorities act. In spite of this, we anticipate that regulatory action will be constructive rather than punitive. Even though it may take some time for investors to warm up to blockchain technologies once more, we are confident that they will do so in the end.
The failure of FTX and Alameda does not indicate that crypto will eventually die out. On the contrary, we think the collapse of FTX definitively proves blockchain’s legitimacy as a powerful and capable technology and as a viable asset class on par with many more established financial tools.