The embattled cryptocurrency industry and its wealthy pioneers face a moment of reckoning after the collapse of crypto exchange FTX and hedge fund Alameda Research.
The embattled cryptocurrency industry and its wealthy pioneers face a moment of reckoning after the collapse of crypto exchange FTX and hedge fund Alameda Research
FTX’s demise was a fitting end to a year of wealth destruction in the cryptocurrency and blockchain sector. The post-pandemic economic shock, which triggered inflation and rising interest rates, sucked capital out of the speculative crypto ecosystem. Prominent firms imploded, from the $40 billion collapse in May of algorithmic stablecoin TerraUSD, to the crypto hedge fund Three Arrows , to the bankruptcies of interest-bearing lending businesses Voyager Digital, Celsius and BlockFi.
“We're now at the breaking point in crypto where everyone will have to take a pause and say, ‘Okay, we've seen a ton of economic wealth destroyed in the last couple of months, we need to start taking this seriously,’” says Matt Cohen, founder of Ripple Ventures, a venture capital firm. “A lot of blockchain technologies and crypto companies built solutions for problems that didn't need fixing, and I think we're now going to have a hard reset.
“I don’t believe a business can persist, operating in this amorphous way, not governed by anyone or anywhere, especially when it's run by a public individual,” says Lisa Ellis, an equity analyst at MoffettNathanson, a division of SVB Securities. Binance’s “dodgy operating model” would be a “non-starter for many investors, public or private,” adds Ellis.
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