The “Bitcoin is dead” crowd is at it again. The crash of cryptocurrency exchange FTX has resurrected these infamous critics who are once again blaming theft on the money that was stolen, not the thief.
“We need regulation! Why did the government let this happen?” they yell.
For example, Chetan Bhagat, a renowned author from India, wrote a detailed “crypto” obituary, comparing the cryptocurrency sector to communism that promised decentralization but ended authoritarianism.
Perhaps not surprisingly, his column conveniently used a molten Bitcoin (BTC) logo as its lead image.
Hi all,
“Crypto is now dead: FTX, a cryptocurrency exchange, collapsed last week, proving a lot of cool guys horribly wrong,” my column in TOI today.Do read and share! pic.twitter.com/A4ClVdHOt2
—Chetan Bhagat (@chetan_bhagat) November 15, 2022
Hello everyone,
“Crypto is now dead: FTX, a cryptocurrency exchange, crashed last week, proving a lot of great guys terribly wrong,” my column on TOI today.Read and share!
Bhagat should have chosen a more accurate image for his op-ed (FTX (FTT) token melting?), particularly after looking at Bitcoin’s decade-long history that has seen it survive even nationwide bans. This includes 465,466 obituaries since his debut in 2009, when he traded for a few cents.
The FTX/Alameda collapse is similar to previous bearish trigger events like Mt. Gox in 2014. Therefore, this failure of centralization will once again underscore what makes Bitcoin special, and why FTX is the opposite of Bitcoin and decentralization.
Furthermore, the incident should also fuel the growth and development of non-custodial exchanges for Bitcoin that will help reduce reliance on trust.
FTX could have held zero Bitcoin in escrow
Traders responded to the shocking FTX crash by withdrawing their BTC from custodial exchanges. Notably, the total amount of Bitcoin held in custody by all exchanges fell to 2.07 million BTC on November 17 from 2.29 million BTC earlier in the month.
United States-based exchanges saw the most outflows, with users withdrawing more than $1.5 billion worth of BTC in the past week alone.
On the 9th of november, FTX halted withdrawals of all cryptocurrencies, including Bitcoin, raising suspicions that the exchange did not have enough reserves to meet demand.
This was made clear in a leaked FTX balance sheet that showed the exchange had zero bitcoins against its $1.4 billion BTC liability. In other words, FTX allowed Bitcoin trading with fractional reserves.
“This is, on the one hand, bad for you, as you will only find out if they have been swimming naked once the exchange implodes, accompanied by the loss of all your funds,” write Jan Wüstenfeld, independent market analyst. And he adds:
“On the other hand, this artificially increases the supply of bitcoins in the short term, suppressing the price and preventing the real price from being discovered. […] Yes, I know these are not real bitcoins, but as long as exchanges issue fake paper, Bitcoin remains operational, the effect is there.”
Thus, FTX’s little or no exposure to Bitcoin potentially reduces its likelihood of selling any remaining funds for liquidity.
The incident is also likely to spawn a new cohort of Bitcoin hodlers by forcing people not to keep their funds on risky exchanges and to practice self-custody. While a decreasing amount of BTC on exchanges means fewer coins available to sell.
Sam Bankman-Fried was anti-Bitcoin
FTX founder Sam Bankman-Fried (SBF) was the second-biggest donor to Democrats, after George Sorosfor the midterm elections, donating nearly $45 million to lobby cryptocurrency regulations that would supposedly benefit his company.
But there is widespread speculation that the SBF tried to stifle the growth of Bitcoin through US lawmakers, as well as press articles, in which it downplayed Bitcoin as an efficient payment system.
MSM lionized this shady character. For example, here are 2 of the 219 articles about him on @FT. @SBF_FTX‘s anti-Bitcoin, pro-centralization and pro-heavy-handed regulation values certainly aligned with theirs.
Was he the poster boy for an orchestrated propaganda campaign? https://t.co/urJcu6mqB6 pic.twitter.com/PTIn1JudXG
— Bitcoms (@bitcoms) November 15, 2022
MSM exalted this shadowy character. For example, here are 2 of the 219 articles about him on @FT. @SBF_FTX’s anti-Bitcoin, pro-centralization, and pro-regulation values certainly aligned with theirs.
Was he the poster boy for an orchestrated propaganda campaign?
Other commentators have also pointed to a connection between SBF and anti-crypto US Senator Elizabeth Warren, noting that the former’s father, Joseph Bankman, helped the politician draft tax legislation in 2016.
This is crazy:
Elizabeth Warren is known for being the anti-crypto Senator
Who helped her draft her tax legislation in 2016?
None other than Joseph (Joe) Bankman, the father of SBFhttps://t.co/QMYkC2gpE9
—Ryan Shea (@ryaneshea) November 15, 2022
This is crazy:
Elizabeth Warren is known for being the anti-crypto senator
Who helped you draft your tax legislation in 2016?
None other than Joseph (Joe) Bankman, the father of SBF
SBF’s influence among US lawmakers has faded as it faces possible criminal charges for illegally using client funds for FTX operations.
Press “F” to pull the chain
Past cryptocurrency market crashes have their roots in the failure of centralized players, as well as “altcoins”, which ultimately ended up being money grabbers.
FTX’s FTT token is just the latest example. Other failed projects that triggered a market crash earlier this year are lending platform Defi Celsius Network (CEL) and Terra (LUNA).
FTX is the opposite of #Bitcoin #Bitcoin ‘s protocol was created precisely to prevent Ponzi schemes, bank runs, Enron’s, WorldCom’s, Bernie Madoff’s, Sam Bankman-Fried’s…
…bailouts and wealth reassignments.
Some understand it, some not yet.
We’re still early.
/21m
— Nayib Bukele (@nayibbukele) November 14, 2022
FTX is the opposite of Bitcoin. The Bitcoin protocol was created precisely to prevent Ponzi schemes, bank runs, Enron, WorldCom, Bernie Madoff, Sam Bankman-Fried…
…rescues and reallocations of wealth.
Some get it, others still don’t.
We are still early.
Created and operated by centralized entities, the supply of these tokens, and therefore the price, becomes vulnerable to manipulation: undisclosed pre-mining allocations, insider VC deals, small allocations vs. total offer, whatever.
It is the exposure to these types of (junk) tokens, particularly in the form of collateral, that ultimately drove cryptocurrency hedge funds Three Arrow Capital, FTX sister firm Alameda Research, and many others to the ground. .
“In our opinion, the cryptocurrency bubble that burst this year occurred in the environment of tokens created only for speculative purposes,” BOOX Research noted, adding:
“While we can debate which cryptocurrencies are ‘bad money driving out good money’, FTT and LUNA are just two examples that everyone can agree shouldn’t have existed.”
Therefore, an altcoin market that should never have existed, including FTT, may further bolster investor confidence in Bitcoin. Early data shows the same, with CoinShares reporting increased inflows into Bitcoin-based mutual funds.
In particular, Bitcoin-based investment vehicles drew $18.8 million into their coffers in the week ending Nov. 11, bringing year-to-date inflows to $316.50 million.
“Inflows started later in the week due to extreme price weakness triggered by the FTX/Alameda collapse”noted James Butterfill, head of research at CoinShares, adding:
“It suggests that investors see this price weakness as an opportunity, differentiating between ‘trusted’ third parties and an inherently trustless system.”
Meanwhile, Bitcoin is not seeing a collapse in demand in the current bear market compared to 2018, on-chain data reveals.
The number of non-zero Bitcoin addresses has continued to rise despite the downward price trend, hitting an all-time high of 43.14 million on Nov. 16.
Compared, The 2018 bear market saw a substantial drop in the number of non-zero Bitcoin addresses, suggesting that traders have become relatively more confident of a price recovery, especially as the FTX ripple effect clears the wood. dead.
Points of view and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investments and trades involve risk, so you should do your own research when making your decision.