The scandalous crisis of the cryptocurrency market is progressing rapidly. On November 8th, it became known that the well-known stock exchange FTX had traded with funds from customers and lost almost ten billion dollars.
FTX and its founder, Sam Bankman-Fried, were seen as a bright, trusted light last year. The 30-year-old former billionaire was considered a genius with a pure heart and was cheered when he spoke out before Congress in favor of regulating the cryptocurrency market – a regulation that would have favored centralized exchanges like his own instead of more decentralized exchanges. Behind the scenes, however, Bankman-Fried had lent client funds from FTX to its trading firm, Alameda Research. When Alameda lost the money and could not repay the loans, there was a liquidity squeeze, and FTX users could not withdraw their funds. They have now filed for bankruptcy. If there is a silver lining, it is that other exchanges have immediately stepped up their efforts at transparency, thus removing doubts that such a process could happen again. Nevertheless, billions and billions of dollars have been lost, and public confidence in an already considered very risky industry has also been severely affected. Crypto advocates argue that this has no impact on the underlying blockchain technology, which should be able to prevent such abuse of power by individuals or institutions through further decentralization and inherent transparency. Nevertheless, we are far from having such technology accessible to citizens in a simple and trustworthy way. Until then, the crypto world is still the wild, wild west.
Photo Sofia Lismont – Translation: Monika Werner
