Crypto... can be toxic as FTX demonstrates

 I've refrained from discussing crypto because there is no real "there" there... no company doing any business we could understand. No product being produced, no services offered to consumers. NOTHING! and people were willing to invest lots of money. Sigh.

News about the collapse of FTX has been all over The Wall Street Journal for weeks. Each article reveals more appalling aspects of how money was stolen from crypto investors. 

 I couldn't resist adding this from 12/16/22 WSJ: "In 2017, Warren Buffett's longtime business partner Charlie Munger, said of Crypto: "I'm proud of the fact that I avoided it. It's like a venereal disease or something." 

Another reason to avoid Crypto: It consumes VAST amounts of electricity!

"Sam Bankman-Fried Ran FTX Like a Personal Fiefdom, Lawyers Say. In bankruptcy court, the crypto exchange’s attorneys said a ‘substantial amount’ of the firm’s assets are stolen or missing."Alexander Saeedy and Jonathan Randles, WSJ, Nov 23, 2022.

"FTX's Sam Bankman-Fried cashed out $300 Million during funding spree. Nearly three-quarters of the $420 million that FTX raised in a fundraising blitz last year went to founder Sam Bankman-Fried, who sold some of his personal stake in the company." WSJ 11/18/22.

"FTX Crypto customers Worry They Will Never See Their Money Again. FTX lawyers have said that in all there could be more than 1 million creditors across FTX's various entities. Beleaguered crypto customers are beginning to lose hope."

"If there is a silver lining to the rapid and dramatic collapse of the cryptocurrency exchange FTX, it’s that it might lead to some long-awaited bipartisanship in Congress — to pass long-needed regulation of Big Tech."  

By Katrina vanden Heuvel writing for The Washington Post, November 22, 2022. "FTX filed for bankruptcy on Nov. 11. The company’s founder and chief executive, 30-year-old Sam Bankman-Fried, has stepped down and lawyered up." "This represents a reckoning for cryptocurrency, a market that has gone underregulated for its entire existence." 

"While FTX’s downfall may be the first cryptocurrency scandal of this scale, the story is all too familiar. Allegedly, Bankman-Fried loaned $10 billion of his customers’ dollars to his investment company, Alameda Research, and used it for risky day trading. When consumers lost confidence and tried to pull their money out, they learned that FTX did not have their funds on hand. FTX covered up the misuse from its customers, its auditors and its own employees."

 

 Katrina vanden Heuvel writing for The Washington Post: "While FTX’s downfall may be the first cryptocurrency scandal of this scale, the story is all too familiar. Allegedly, Bankman-Fried loaned $10 billion of his customers’ dollars to his investment company, Alameda Research, and used it for risky day trading. When consumers lost confidence and tried to pull their money out, they learned that FTX did not have their funds on hand. FTX covered up the misuse from its customers, its auditors and its own employees.

My advice if you own crypto: Sell and invest in a real company that produces products and/or services.  

 

NFTs and Crypto are the new multilevel marketing

 "In a recent ad for cryptocurrency exchange FTX, Tom Brady asks seemingly everyone in his contact list, 'You in?' As in, are you going to join him in buying some crypto, and not, presumably, in being a football star married to a supermodel. The pitch is straightforward celebrity-endorsement fare, designed to capitalize on the FOMO that is the standard psychological tactic of those who are already invested in cryptocurrencies and related technologies, and who would like the rest of us to come aboard. Mr. Brady has an equity stake in FTX" writes Christopher Mims, The Wall Street Journal, 2/19/22.

This celebrity  pitch is typical of multilevel marketing companies. Our getting 'in' will obviously enrich those urging us to do so, by driving up the value of their own holdings. "And then, hey, the same could be true for us!"

"But how does owning or trading crypto, which is after all just data—infinitely reproducible, supposedly nearly free thanks to the internet—make one rich? Or for that matter, owning or trading other digital assets like NFTs (or 'nonfungible tokens')?"

"There’s a paradox at the root of the growing crypto ecosystem—a disconnect between the technology and the economics. While individual digital assets—bitcoins, pictures of 'bored apes,' giant JPEGs of everything the artist Beeple has ever produced—can be unique, the underlying nature of the internet means that there is, in aggregate, a potentially infinite supply of cryptocurrency, NFTs and all the other exchangeable tokens that make up “crypto” and the broader vision for a decentralized internet known as 'Web3.'

"Basic economics suggests an unhappy outcome: When the demand for something is limited—there are only so many people on earth, and only so much traditional money to be converted into tokens and cryptocurrencies—and the supply is infinite, the average price of that asset is going to zero."

"Recent research has found that most NFTs don’t sell. A hardly-comprehensive list of dead and abandoned tokens created for crypto projects includes nearly 2,400 entries. For every new cryptocurrency that retains any value, there are many that become worthless."

FOMO: fear of missing out.