Pundits view the collapse of the FTX exchange as the end of cryptocurrencies and related venture capitalists. But it’s not. The demise of FTX may signal the end of Americans using unregulated exchanges and possibly the ending of exchange-native tokens, but crypto itself has not changed at all.
The FTX collapse is a symptom of a broader issue: the “profit at any cost” attitude often seen in traditional finance. Despite the lip service given to FTX as a regulated firm, the exchange ultimately succumbed to profit-driven fraud.
This leads us to the roots of Samuel Bankman-Fried (SBF), a quantitative trader at Jane Street trading firm. However, SBF did not fail due to his background. Warren Buffet, who is not a fan of cryptocurrencies, has a well-known saying that applies here: “You only find out who is swimming naked when the tide goes out.” It seems that SBF was trunkless in that turquoise Bahamian water.
Either he underestimated or disregarded the risk he was taking, overleveraging FTT — his company’s loyalty point disguised as a $4 billion market cap store of value — and losing a fortune on this bet.
It is time for the crypto sector to abandon the 10x mentality of pursuing massive wealth and concentrate on the fundamentals of crypto. Never was crypto about the next meme coin, x-to-earn application, or minting your tokens to support risky business practices. Instead, it was about financial self-sovereignty and cutting out the intermediaries.
It is time to return to this maxim.
Crypto is not a game of exponential returns and speculative bets. Cryptocurrency is about recovering the daily 3% rent that the global financial services sector charges companies and individuals. And it’s about a system in which access to financial services is not restricted by location, race, gender, or religion.
Invariably, crypto winters mark a turning moment for digital assets. Although winters destroy wealth and ruin lives, they also leave us with the legitimate innovations of the previous bull market. The sector may continue to be driven by speculation and trade, or we can fight to disrupt credit card firms, eliminate payday lenders, and bank the unbanked.
JPMorgan’s recent entry into DeFi is noteworthy. JPMorgan did not rush into crypto options bets. Instead, it demonstrates how you won’t need data centres, mainframes, or hard lines to conduct complex financial operations shortly. Ultimately, this shows that the TradFi system can be improved in a compliant, auditable, and deliberate manner.
WORLD! J.P. Morgan has executed its 1st *LIVE* trade on public blockchain using DeFi, Tokenized Deposits & Verifiable Credentials, part of @MAS_sg Project Guardian 🙌🚀🔥https://t.co/XI212SG4zg Many world 1sts here, & since this is public ⛓ here’s a transparent🧵on what we did:
— Ty Lobban (@TyLobban) November 2, 2022
It is time to envision a future where enterprises with complex software and processes remove the go-betweens in online transactions. People then can borrow money at prime +1%, as opposed to the predatory rates charged by banks. They can get paid every second of the working day using smart contracts instead of every two weeks or each month.
The sector is ready. There are advanced monitoring and accounting tools for your assets instead of homegrown enterprise systems with backdoors. Some operators can develop a compliant flow of fund models and auditing procedures to ensure digital assets’ security. There are best practices for wallet management, and custodians are required by law to safeguard your assets and avoid lending them to others for unhinged trades.
We need to mature with it if we truly want others to opt out of the current, flawed system and adopt digital assets.
