Experts say that the collapse of the FTX exchange is the end of cryptocurrency and associated venture capitalism. But it isn’t. king, but in reality, crypto never had a king. FTX could mean a lot of Americans using unregulated exchanges, and it certainly is the end of native exchange tokens, but crypto itself hasn’t changed a bit.
The collapse of FTX is a symptom of a deeper problem, namely the win-at-any-cost mentality of traditional finance. Like many of its conventional counterparts, the exchange fell into profit-seeking scams. The stain left by FTX has no more to do with actual crypto than Enron had with actual oil in the ground.
This brings us to SBF and its roots in the quantitative trading firm Jane Street. SBF was a quant trader who asked why he would ever use a decentralized exchange and then answered his question about the abuse of billions of client funds. However, SBF did not fail because of his background. Warren Buffett, who isn’t a fan of cryptocurrencies, has an oft-repeated quote here: “You only find out who’s swimming naked when the tide goes out.” It turns out that SBF didn’t have a tribe in those turquoise waters of the Bahamas.
He misjudged or ignored the risk he was taking by overexploiting the Financial Transaction Tax (his own company’s loyalty point disguised as a $4 billion market cap store of value) and lost big on that bet.
It is time for us as the cryptocurrency industry to ditch the 10x mentality, make huge profits and focus on the fundamentals that brought so many of us into this world. Cryptocurrencies have never been about the next meme coin or the next X-to-Profit app and certainly not about minting your tokens to fund risky business practices. It was about financial independence and doing without intermediaries. It’s time to return to that maxim. Crypto is not a game of exponential and speculative gain bets. Crypto is about taking back the 3% rent that the financial services industry imposes on businesses and consumers worldwide daily for money.
The promise of cryptocurrency is not just profit: it is a system in which access to financial services is not determined by geography, race, gender or creed. It’s a system with no intermediaries pulling dollars out of our pockets at all times. And where greedy gamblers cannot treat our life savings like their bankrolls at the roulette table. With the acquisition of FTX, we just found a new player to stand behind. Crypto winters are always a turning point for digital assets. As winters crush stats and decimate lives, each winter also leaves us with the legitimate message of the last bull cycle.
We can let speculation and commerce continue to drive our industry, or we can work to disrupt credit card companies, destroy payday lenders, and educate unbanked bankers. Maybe we continue to obsess over personality, or the adults in the room are finally getting up.
JPMorgan’s recent entry into DeFi is a notable silver lining for this whole cloud. JPMorgan didn’t dive into crypto to make multi-leg option bets. You have many opportunities to make money through trading. No, their first foray into an on-chain lending pool, leveraging a fast, low-cost network like Polygon to show that shortly, you won’t need data centres, mainframes, or landlines to conduct sophisticated financial transactions: you only need the blockchain.
Public Regulated companies like J. Morgan are demonstrating that the TradFi system can be updated thoughtfully, compliant and auditable. It’s time we focused on a future where sophisticated companies with sophisticated software and processes cut out the middlemen from online transactions. A future where people can borrow money at a preferential rate of +1% instead of the banks’ abusive interest rates. A future where people get paid every second of the workday via a smart contract instead of once every two weeks.
The industry is ready. There are sophisticated tools to monitor and account for your assets (instead of using local business systems with backdoors). Some forward-thinking operators can design compliant cash flow models and audit practices to ensure digital assets remain secure as use cases escalate. There are best practices for portfolio management and custodians who are required by law to protect your funds and not lend them to others for wrong transactions. The industry is poised to mature, and if we want others to get out of the broken system and embrace digital assets, it’s time to mature with it.