The beautiful downfall of crypto — and the metaverse is next
Sam Bankman-Fried, the man behind FTX, with a name that shames even J.K. Rowling’s best character-naming efforts, lost over 90 percent of his net worth in a week as his crypto platform was unable to escape what can only be described as a classic “bank run”.
For a long time, it was looking like FTX could be the exception to the business rule(s). But as FTX comes crashing down, it should be painfully obvious to all the crypto pundits — and those fooled by a fancy facade — how basic market principles still rule supreme; great companies last, while bad ones always perish.
Bankman-Fried launched the company in 2019 and moved to Hong Kong to run the business from there. Later, operations were transferred to the Bahamas for its “crypto framework” (read: low taxes). From there, Bankman-Fried and his team of about ten “executives” ran a multi-billion dollar company like it was a fun little side-project, keeping without a CFO — or even a real board. Two years in, FTX had garnered massive interest and was being pinpointed as a vital cog in the machinery of the “new internet” movement. Old money-investors were literally lining up to invest in the platform, as the valuation of FTX soared to 32 billion dollars on the back of a massive infusion of 2.2 billion dollars from perhaps the most well-known venture capital fund in the world: Sequoia Capital. Sam Bankman-Fried was being hailed as a wunderkind, speaking at conventions and garnering a huge following.
Then, in a matter of days the house of cards collapsed. Information started leaking out about how FTX was being run and how it supposedly was using investor funds to prop up Alameda Research, a crypto trading firm also founded by Bankman-Fried. There were rumors that FTX might not have enough money to cover deposits. The leak caused a run on the platform, leaving FTX about an 8 billion dollars short. Now, in a beautifully ironic twist, investors are calling for regulation of the crypto scene — the one thing the tech bros swore that this new technology would do away with!
It goes to show that the old adage of just throwing money at a thing STILL does not work. If people don’t want this product — if there’s no trust — then it does not matter how much funding you have. It is still a house of cards, at best. FTX, much like the rest of the scummy crypto scene, promised decentralization, faster service, and new investment opportunities, but became a playground for tech bros and venture capitalists doing high-risk transactions, with an underbelly of criminal activity. Now, real people with real lives pay the price — just ask all the Canadian teachers saving up for retirement, whose fund now has lost 95 million dollars in value in the wake of FTX bankruptcy. One can only hope the collapse of FTX will serve as an example, and that this entire energy-guzzling, crime-infested, and practically useless industry comes crashing down with it.
Hopefully, the “metaverse” is next. The almighty Zuck is throwing piles of cash at his meta projects in the hope that this “new” tech will catch on, all while laying off 11,000 of Meta’s employees. Speaking of trust, I suspect that reckless spending (in the billions), on what is best described as a vanity project, while cutting thousands of workers to save your bottom line, isn’t exactly doing wonders for the company’s rep. Or for the “metaverse”, for that matter. Maybe the Meta executives should hop on one of their virtual meetings and let the avatars battle it out — reportedly, there’s plenty of bandwidth to go around.
