FTX and the Crypto Winter

The lurid collapse of FTX and with it Crytpo sentiment the world over bring to mind an old adage in high Finance. When the tide goes out, we find out who was really swimming naked. And it turns out, in the far off Bahamas, Sam Bankman-Fried was not only swimming naked. He was riding a jet ski that you paid for. 

What do we really mean? That in the end, the recent mania surrounding Crypto was only sustained by central bank policy. Put that much liquidity in the system, and the frontier of the risk curve, say a token like FTT, or any other crypto project with dubious innovation to recommend it, will rally. But drain liquidity, raise interest rates, crush institutional appetite, and an exchange collateralized only by the belief that Crypto was the future was bound to go bust. Say what you will about potential criminality. Bear and Lehman made the same mistake. Excessive leverage built on lofty valuations will always form dry grass for the next brushfire to carry out. 

In times like these, though, it is too easy to write off the whole space as trivial or deserving of its inevitable comeuppance. Every innovation is left for dead more than once. Even the internet was disparaged as little more than a cute version of the Fax machine. Until it became evident only in hindsight that it was just as consequential as the industrial revolution. 

In the end, it does force us to re-examine what projects actually have use cases, far off as they might seem. As ever, we discuss.