Crypto didn't fail. A centralized entity that requires trust failed. No sugar coating here, FTX/Alameda blew ~10 Billion USD (to be confirmed) and this will impact investor confidence in crypto and the industry for some time. Here’s a quick recap of events:
Coindesk report reveals that Alameda Research’s (FTX investment arm) balance sheet consists of $14.6b in assets. However, a large portion of that was FTT, the token issued by FTX. ($3.66 of unlocked FTT & $2.16b of FTT collateral)
Binance CEO CZ tweets that they plan to liquidate all their FTT ~$500m dollars worth. (Side note: Binance was the first investor in FTX in 2019, and they exited in July 2021)
This caused a bank run on FTX. Users withdrawing funds.
Alameda Research drains wallets and sends them to FTX to shore up liquidity and defend FTT.
FTX eventually freezes customer withdrawals and barely communicates anything to customers.
FTX CEO SBF announces non-binding deal to be acquired by Binance (which Binance backes out of within 48 hours of DD).
FTX likely facing bankruptcy with billions of dollars in deficit on their balance sheet
It appears there was wide-scale fraud and misuse of user deposits perpetrated by FTX and their investment arm Alameda Research. This is illegal of-course, and would have been caught or stopped earlier had they been regulated in a reputable jurisdiction. This is why we established CoinMENA under the Central Bank of Bahrain (and soon under VARA in Dubai), with a strong regulatory framework and oversight. We go through regular audits and have to submit daily, monthly and quarterly reports to the regulators. More importantly, we don't offer leverage / margin and see crypto as a long-term investment and not a get rich quick scheme. On a personal note, I’m extremely disappointed with the level of fraud FTX was engaged in. I got into crypto because I wanted a more equitable financial system than the current one we have. In the current fractional reserve banking system, it is standard practice for banks to lend out user deposits, which makes them susceptible to insolvency. FTX operated like a reckless financial institution and took excessive risks at the expense of its customers. If crypto wants to be the future of finance, we have to do better and not simply recreate a tokenized version of the old system. Long term, this doesn’t impact my bullish outlook on crypto, in fact, it makes me more bullish on the importance of decentralization and trustless systems, as this was an institutional/people failure, rather than a “crypto” failure.