Sam Bankman-Fried, co-founder and chief executive officer of FTX, in Hong Kong, China, on Tuesday, May 11, 2021.
Lam Yik | Bloomberg | Getty Images
With a nod to Gertrude Stein, “there’s no there there,” in the world of cryptocurrencies.
The spectacular crash of FTX – the crypto exchange founded by the one-time wunderkind, Sam Bankman-Fried – coupled with his stunning loss of wealth is yet another lesson in how rank speculation adversely affects markets and even the most seasoned investors.
Whether it’s manias in Sumerian grain markets, Dutch tulip bulbs, railroad bonds and everything from internet service providers to digital currencies, leveraged speculation is as old as markets themselves.
The unsurprising crash in crypto is another example of everyone from the most sophisticated investors to the least-knowledgeable day traders being sold a bill of goods and buying it gleefully with the hopes at a shot of “earning” generational wealth.
It’s both an old story and an ongoing one.
A familiar narrative
During the internet bubble, investors poured dollars into so-called “vaporware,” computer hardware or software that had yet to be produced and was never released.
Most of it never was.
Crypto strikes me as a form of vaporware.
Digital assets that don’t exist in reality have been used as collateral to buy and sell other non-existent assets with a heavy dose of borrowed money. This creates a daisy chain of interlocked digital tokens that have no inherent value except what people are…
