Cryptomageddon & the Revenge of Old School Banking

FTX pulls a Lehman Brothers as the crypto industry licks its wounds

Mookie Spitz

--

Crypto is screwed right now for the simple and obvious reason that under- and unregulated industries inevitably lean into unfair business practices and fraud to maximize profits for their owners. Always.

“Self-regulation” is an absurd oxymoron because people can’t and won’t ever limit themselves. Why would they, especially when so much money and power are at stake? If people can steal, they will.

The mystique of crypto centered on its decentralized, “Fuck the Man and His Systems” allure. Traditional banks and their regulators rip everyone off the slow, old fashioned way. Blockchain changed it all.

The whole idea of a “public ledger” is enticing. Every transaction is transparent, anyone can manage a chain by cracking big primes, and the Man and His Systems get circumvented by a cool alternative.

Since inception, though, the benefit of crypto has also been its Achilles Heel: bitcoin, tokens, and everything of value are nothing more than electrons spinning on servers, zero backing in the world.

Old school money, in contrast, is printed by governments; stocks are shares of actual companies’ perceived value; bonds are borrowed slices of money and equity. Crypto? Lines of code.

That gave crypto amazing flexibility and liquidity. Early adopters alleged that regulation wasn’t needed because the blockchain never lied, stability was assured through transparency.

What’s doubly-ironic is you’d assume the opposite, that such funny money would have to be even more rigorously regulated, since technically it doesn’t even exist. What’s to stop it from vaporizing?

The biggest irony is that the fall of FTX is identical to the Lehman Brothers bankruptcy of 2008: conflict of interest between investors and lenders within the same company leading to a run in a bear market.

When Wall Street is bull, everyone is a genius and spreadsheet shenanigans are ignored. As long as most people are consistently making lots of money nobody gives a shit how fraudulent you are.

But the nanosecond losses cascade, you’d better have enough real equity to save your ass, or it’s hasta la vista, baby. And when the smoke finally clears, everyone will see what a crook you’ve been all along.

The ultimate result of all this won’t be the end of crypto, it’ll be the regulation of crypto. The lesson here is that money is money, greed is greed, and The Man and His System are here to stay.

I applaud this money madness. If nothing else, the markets have proven their ability to regain equilibrium. Along the way we’ve acquired interesting new tech. Let’s see how it evolves before the planet boils…

#cryptcrash #bitcoinbuster #ftx #carbonkills

--

--

Mookie Spitz

Author and communications strategist. His latest book SUPER SANTA is available on Amazon, with a sci fi adventure set for Valentine's Day 2024.