By now, I’m sure everyone reading this article has heard about some form of cryptocurrency. Whether it be BitCoin, DogeCoin, NFTs, and so on, these alternative methods of payment and financial investment dominated the global scene over the past few years. The main draw of these currencies was their extreme volatility that made them an intriguing gamble for businessman, college students, and everyone in-between. For example, a singular tweet by Elon Musk announcing that Tesla would no longer accept Bitcoin payments due to environmental concerns singlehandedly
tanked Bitcoin’s value by nearly $10,000 over the span of a few hours. These tweets by Musk and other Twitter influencers became commonplace, as they attempted to influence the market in their interest. These aforementioned fluctuations also caught the eye of federal prosecutors, who could view these tweets and other actions as clear-cut attempts at market manipulation in some instances.
Take FTX as an example of what could happen when Crypto goes wrong – currently, founder Sam Bankman-Fried is under investigation of a market manipulation inquiry related to the now-bankrupt crypto exchange known as FTX. FTX, a hedge fund whose initials were short for ‘Futures Exchange’, was a market titan. At its peak in July 2021, it had over one million active users, and statistically was the third-largest crypto exchange by volume. The company also held an increasing presence in American society – they signed a 10 year, $135 million dollar deal to obtain the naming rights for the Miami Heat basketball stadium, held multiple sponsorships with MLB, F1, and TSM, and were actively engaged in sponsorship talks with esteemed singer-songwriter Taylor Swift.
Despite all of this, the company filed for bankruptcy on November 11th, 2022. The company’s well-documented collapse essentially occurred over a ten-day period in which a news report by cryptocurrency news outlet CoinDesk reported that Alameda Research, another one of Bankman-Fried’s companies, held a $5 billion position in the native trading token of FTX. Due to the following market concerns regarding FTX’s leverage and solvency, a plethora of companies pulled out of FTX’s open-trade forum, leading to a collapse that has been compared as crypto’s ‘Lehman Brother’s’ moment in terms of market impact.
Shortly after these findings, Bankman-Fried was arrested and eventually extradited from the Bahamas to the United States, where he was later released on a record-setting $250 million bond. The investigation is still currently in an early development, where prosecutors are determining if there’s any wrongdoing on Bankman-Fried’s part regarding the potential misappropriation of billions of dollars in customer funds.
Regardless of what happens in the coming months / years as this investigation transpires, the very nature of FTX’s collapse has had a detrimental impact on the cryptocurrency market as a whole. Investors have lost trust and confidence with the non-fiat currency, and it could take decades for the market to recover (if at all). This also ties in with Elon Musk’s purchase of social media giant Twitter on October 27th, 2022. Musk was one of the most prominent crypto supporters, but has suffered a substantial decrease in his credibility and overall reputation due to his actions revolving around the purchase – this is reflected in Tesla’s recent stock declines as well (which is another Musk-led corporation).
What are your thoughts regarding these recent developments? Have you or someone you know ever invested into cryptocurrency – if so, what were the results of said investments? I’d love to hear everyone’s comments on this unorthodox issue.