Only a fortnight ago Sam Bankman-Fried was in the stratosphere. But the high-speed implosion of FTX has dealt a catastrophic blow to an industry with a history of failure and scandals. Is this the end for crypto?
from grace was hard and fast. Only a fortnight ago Sam Bankman-Fried was in the stratosphere., his cryptocurrency exchange, then the third-largest, was valued at $32bn; his own wealth was estimated at $16bn. To the gushing venture capitalists of Silicon Valley he was the financial genius who could wow investors while playing video games, destined, perhaps, to become the world’s first trillionaire.
Big personalities, incestuous loans, overnight collapses—these are the stuff of classic financial manias, from tulip fever in 17th-century Holland to the South Sea Bubble in 18th-century Britain to America’s banking crises in the early 1900s. At its peak last year, thesurged to the giddy height of almost $3trn, up from nearly $800bn at the start of 2021. Today it is back at $830bn.
Amid the wreckage of the past week, it is worth remembering the technology’s underlying potential. Conventional banking requires a vast infrastructure to maintain trust between strangers. This is expensive and is often captured by insiders who take a cut. Public blockchains, by contrast, are built on a network of computers, making their transactions transparent and, in theory, trustworthy.
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