Does the FTX fiasco signal the death of cryptocurrency or does it indicate that something big is about to unfold?
The Economist published an article two days ago implying that the FTX fiasco could signal the end of crypto. The typical common characteristic of writers who cover this drama is the superficial comparison to previous busts as if they are all the same. They fail to identify one very important element missing in the current disaster, which is the participation and hysteria of the masses. Instead, the existing catastrophe was born amid fear and the masses do not even understand what blockchain and cryptocurrency are.
This to me tells a lot that instead of death, the present adversity could be an indication that something big is about to happen in the crypto space.
Of course, it is a consensus these days that the destructive consequences of the actions of SBF will remain for months or even years. I am not buying such an idea. All I know is that when almost everyone particularly the mainstream news outlets cover the same topic for several days, usually what happens next is the exact opposite of what they say.
I find reading the Economist article both entertaining and exciting. In the stock market, there is this popular saying “buy when there’s blood in the streets.” This time, it is not just blood; it is as if there are dead bodies scattered everywhere. Following that widespread maxim, now is the best time to buy. The challenge is if you still have such buying power.
For many, the FTX crash confirms the popular idea that the space is only suitable for criminals. Crypto these days looked so ugly, “wasteful and useless” says the writer. And this has been validated by the decline in the total market value of all cryptocurrencies from the height of almost $3T last year down to $830B now.
Getting Tired of Negativity?
After a few days perhaps of getting tired of the negativity of the FTX fiasco, other key figures and writers start to have a creative spin on this story. For instance, Tim Draper, a Bitcoin maxi perhaps denies the popular news that FTX’s bankruptcy has something to do with Bitcoin on the basis that the former was a centralized entity whereas the latter is a decentralized one. Despite the dominant pessimistic sentiment, Draper maintains his $250,000 forecast for Bitcoin in 2023.
Another example of such a positive take is the one published by Alex Dovbnya on u.today. Contrary to the widespread outlook, Alex quoted a cryptocurrency trader and market analyst thinking that the FTX implosion “might actually make the ongoing bear market shorter.” Without confirmation from JP Morgan, such an idea might be considered “wishful thinking.” This giant banking firm shares a similar perspective and “is convinced that the dramatic collapse of the cryptocurrency empire could potentially speed up the introduction of cryptocurrency regulation while also placing decentralized finance in the driver’s seat.”
Just today, I find two interesting articles claiming that despite what happened to FTX, “271 institutional investors (91%) are interested in investing in tokenized assets” and that Man Group Plc, a London-based investment manager had $138.4 billion in digital assets by the end of September this year.
So, what do you think? Is the FTX fiasco leading to the death of cryptocurrency? Or is this an indication that something big is coming?