Second, is the regulatory future of cryptocurrency in jeopardy? After all, FTX was one of the few US crypto companies that invested heavily in lobbying, and Mr. Bankman Fried was seen as the “white knight” with the best chance of persuading skeptical lawmakers about the value of cryptocurrency. Now, those efforts seem to have stalled, at best – and regulators who want to portray crypto as an out-of-control Wild West will have another example to point to. Catherine Wu, cryptocurrency investor, Tweet on Tuesday It was a “really disgusting news day – I can’t even begin to assess the potential damage our industry will have to contend with”.
Third, will the collapse of FTX lead to a broader market failure, as the collapse of Lehman Brothers did in 2008?
Already, the news has spread to the rest of the cryptocurrency market. Both bitcoin and ether fell on Tuesday, with Solana (the FTX-backed cryptocurrency) dropping nearly 20 percent. Shares in publicly traded crypto companies, such as Coinbase, also fell. FTX investors, including Sequoia Capital, Lightspeed Venture Partners and SoftBank, are likely to lose most or all of their investment. Given how intertwined FTX is with the rest of the cryptocurrency economy, it may be a while before we know the full extent of the damage.
The hope, of course, is that unlike in 2008, when the Wall Street crash turned into a global financial crisis that left millions of Americans losing their jobs and homes, the fallout from the FTX crash will still be mostly contained in the cryptocurrency industry. But it’s still too early to tell.
And finally, what will happen to Mr. Bankman Fried? Until this week, he was the undisputed king of cryptocurrency — and an increasingly powerful force in American politics, thanks to big donations For Democratic candidates and issues. His fortune, which was estimated at more than $15 billion prior to the sale of Binance, supported philanthropy (it is major donor for effective altruism), media organizations (he is an investor in Semaphore) and companies in and out of cryptocurrency (he is a major shareholder in Robinhood, a stock trading app).
Mr. Bankman Fried’s days as a crypto tycoon may be over. (Tuesday, Bloomberg pot that his net worth has declined by 94 percent and that he is no longer a billionaire). But the bigger question, for crypto investors, is whether his empire was extraordinarily volatile, or whether it was the first to fall.
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