The downfall of FTX 🤯🌋

Thoughts on the bigger picture behind FTX's downfall and the recent havoc.

What currently shakes the crypto industry is unprecedented in scale, reach and gravity.

I cannot remember an event in the last 5 years that undermined the trust of this industry in a similar way. Mt. Gox hack (2014) and the DAO hack (2016) were big at the time.

But FTX is on a different level given how interconnected FTX is in the ecosystem and its reputation in TradFI and the general public.

Remember its super bowl ad this year with Larry David? Or its deal with football star Tom Brady? Or the "FTX Arena" branding for the Miami Heats?

What is happening now destroys the trust that has been built up beyond the core crypto industry with retail, TradFi and other traditional non-finance players entering the space over the last 3-4 years.

The LunaTerra, 3AC and Celsius collapse were forerunners but they were very much more isolated in the space. So was Mt. Gox and the DAO hack.

Chances are that more is coming. The FTX contagion is likely massive.

e.g. the Solana ecosystem is affected with its Sollet tokens (soBTC) issued by FTX. No one knows whether FTX still has the underlying assets. The issue: practically all the major DeFi platforms have soBTC assets as collateral since it has long been accepted as the defacto BTC in the Solana space.

Galaxy Digital has a $76.8 million exposure to FTX. It's likely that many more household names have direct exposure to FTX.

Meanwhile, many Bitcoin miners will have to capitulate at these prices, selling BTC for liquidity.

I believe web3 is in the process of rebooting itself. This is a massive setback.

Many core crypto people cannot affiliate with the recklessness and greed that has entered the space within the last years. They believe in the potential of this technology to create an internet of value in which ownership and value is distributed more equally.

It's going to take time, but we will emerge stronger.

And I think Bitcoin will too.

– 10.11.2022 –