FTX and Bitcoin are good and bad – Bitcoin Magazine
This is an opinion editorial by Mickey Koss, a West Point graduate with a degree in economics. He spent four years in the infantry before transferring to the finance corps.
When one of the Bitcoin Magazine editors reached out to ask what I thought the FTX collapse meant for bitcoin, my first instinct was simply “Tick-tock next block.”
However, after some reflection, I think it is difficult to cover this scenario in a one-dimensional view.
For whatever reason, my mind immediately went to an old Clint Eastwood movie, “The Good, The Bad And The Ugly,” which conveniently provides the perfect setting for my thoughts on this predicament.
If there’s one good thing to come out of this scenario, it’s the knowledge that centralized exchanges may not be your friend after all. Discussions with (relatively) normal people about self-storage inevitably result in expressions of fear that they don’t trust themselves to hold their own keys. As Caitlin Long points out below, a large exchange might not be so good at it either.
It is clear that the masses are taking hold. Two days ago, cryptocurrency news firm CoinTelegraph reported that $3 billion worth of bitcoin left exchanges in the week leading up to the publication of November 13, 2022. If you understand Bitcoin, you probably realize that this is pretty important news and could be one of the best, if not only, good results from this whole debacle.
Price suppression via “paper bitcoin” has long been a point of discussion in certain Bitcoin circles. The more people who take self-responsibility, the more people who not only reduce the counterparty risk of losing their bitcoin, but also reduce the capacity for exchanges to issue paper bitcoin IOUs.
Warren Buffet said, “It’s only when the tide goes out that you learn who swims naked.” Self storage allows you to just sit back and enjoy the show so to speak.
Senator Elizabeth Warren, among others, is already calling for “a big crypto bill.” With the collapse of an offshore, unregulated altcoin casino, politicians now have an uplifting moment they can use to get something done.
“Sen. Elizabeth Warren (D-Mass.) said Tuesday that a digital currency bill must be ‘comprehensive,’ covering consumer protections, anti-money laundering rules and climate protection for cryptomining.”
Senators Cynthia Lummis and Kirsten Gillibrand argue that the lack of action on crypto legislation in recent years and months has put the United States at a regulatory disadvantage.
Ironically, one of the crypto bills under consideration was written using FTX.
“The bill — introduced by Senate Agriculture Chair Debbie Stabenow (D-Mich.) and Sen. John Boozman (R-Ark.) — faces scrutiny in the wake of the FTX collapse because the company was a major lobbying force behind the legislation. SEC Chairman Gary Gensler has said that the proposal is “too light-hearted.”
While US regulation will provide potentially much-needed clarity for institutions, a rush package to deal with a new situation could result in an end product that is less than optimal for the major markets. My hope is that legislation will help to slow down the process in order to facilitate a more conscious and thoroughly thought-out piece of legislation.
The ugly one
BBC News reported on the day this was written that over a million people and businesses are now owed money by FTX. With the bankruptcy filing, it is unclear who will be reimbursed, if anyone, and how much money they will actually get back.
While it is easy to criticize cryptocurrency gamblers and day traders for not taking possession of the coins, the picture is more complex than that. I have friends and family who were into self-storage and kept their assets on BlockFi. Their coins are now frozen in limbo, unsure when they will be able to withdraw – if ever.
The fallout from FTX is still unraveling and I’m sure a lot more collateral damage will be revealed in the coming weeks.
Stay humble and stack Sats
While it is simple and potentially therapeutic to think about the unethical and potentially illegal activity of FTX and SBF, I would encourage Bitcoiners to stay humble.
It’s situations like this that breed the next generation of self-sustaining bitcoin maxis. We must use this opportunity to lead and teach.
As I have already written in previous pieces, I narrowly avoided losing everything until the Celsius collapse earlier this year, just months before I started writing for Bitcoin Magazine. Sometimes we just don’t know what we don’t know. Help them see the light.
This is a guest post by Mickey Koss. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.