We have now witnessed the collapse of the largest (so-far) 21st century “tulip bubble” as the FTX (crypto) Exchange collapsed — taking down the value of the best known crypto-currencies, along with the equity of some very sophisticated players and the wealth dreams of small-time investors.
When it was revealed that the FTX “exchange” was backed by capital denominated in crypto tokens created by its founder Sam Bankman- Fried (with no intrinsic value), the “Ponzi scheme” collapsed into a $32 billion loss of value in one day.
There was to be no last-minute rescue. FTX Exchange has filed for bankruptcy, SBF has resigned. Accounts are frozen. It is likely that those who held their crypto-currencies at FTX will lose most of their value. And the major financial players who invested in FTX — including some big Wall Street venture firms — have lost billions.
It’s a scenario reminiscent of Enron — balance sheet shenanigans, no-value assets, interlocking companies — and no transparency. Yes, laws were changed after Enron — but FTX operated in an unregulated global marketplace, headquartered in the Bahamas. As in Enron, money has simply disappeared.
Meanwhile, the price of all cryptos plunged. Bitcoin has traded as low as 15,500 before rebounding a bit. That’s down from a high made in December almost two years ago of over 60,000.
It’s not that the blockchain concept is without merit. A digital currency will eventually come. But…
