The demise of FTX has sent a shockwave through the blockchain, and financial sector this week. Just a short time ago, the former CEO, Sam Bankman-Fried, and his exchange FTX were lauded as the best-of-the-best in the crypto space. The unraveling of FTX and their counter-party, Alameda Research can best be alluded to as a “Wolf in Sheep’s Clothing.”
So what exactly happened? For starters, a lack of clarity, and integrity has tipped the dominoes unfavorably for those that trusted FTX to custody their assets. Now, insolvency runs rampant as FTX has filed for Chapter 11 bankruptcy due to mismanaging funds. Contagion among many notable names in the space such as, Genesis Capital, BlockFi, Voyageur as well as tokens such as Solana, and FTT have all been negatively affected by their exposure to FTX. Unfortunately, it looks like there is more to come as well.
With no regulation per se, and all the right words, FTX simply mislead their users into believing that they had their best interest in mind. The biggest losers here are those that trusted them at their word, and with their assets. Users didn’t have a clear lens to view their investment strategy, philosophy, and FTX lacked transparency. What makes this even worse is that it sets the adoption of this technology back, and is the opposite of the ethos that blockchain builders typically stand for.
As we say here often, “Process before progress®.” It is pivotal to know what you own, and why you own it. Without a clear understanding of these key principles, investment portfolios and emotions are subject to vulnerabilities. We will continue to watch how this affects blockchain regulation, adoption, and sentiment going forward.