Crypto Ice Age
TLDR of what’s going on
This is the story of a quirky boy genius with a 200 IQ who became a trading god. He builds the #2 crypto exchange in the world in virtually no time and makes the competition look utterly incompetent with his meteoric rise. He starts making more money than god and at one point apparently makes $1 billion a week (on trading fees alone). He gets superstars like Tom Brady to invest their fortunes into FTX. his thirst for power grows and he becomes more involved with politicians than any other person in the space. He soon becomes the poster boy for crypto legitimacy, especially after stepping in as other CeFi companies are blowing up, saving people money and solidifying his position as the darling of crypto. The hero we all needed.
But things slowly start to take a turn for the worst. Once a juggernaut, his trading company Alameda blows up, but instead of letting it explode and letting FTX continue to make as much as $1 BILLION a week (obviously not in a bear market), he takes users' funds to try to save Alameda. This inevitably results in FTX blowing up as well. Having to beg his public bitter rival for help saving his ass. You can’t make this shit up! This reads like a South American telenovela script. How we wish it was.
What this means for the space
This is at least an order of magnitude worse than 3AC, LUNA and celsius. Just imagine what all those boomer regulatooors Sam spoke and donated to going to think of crypto now. No to mention all the people that got royalty screwed. There are reports that billions of dollars of hedge funds' capital have been wiped out because they had money on FTX. We are no longer in a bear market. I think that crypto winter is here. The fallout from the FTX debacle is going to take a lot longer to resolve. VCs will blow up and stop investing in the space, draconian regulation will follow and the masses will be disgusted by crypto. I, for one, am far more shaken by this than by the previous blow-ups.
Positives & path forwards
As the entire crypto industry continues to burn due to CeFi blowing up, DeFi continues to cover itself in glory, it continues to work as designed without skipping a beat. Despite the lack of any regulatory oversight. ETH managed to pull off a modern world wonder of engineering with the merge. Uniswap continues to allow anyone to trade, trustlessly, without any middleman, in a decentralised manner such that it can not be controlled by any government. You can borrow or lend on Aave without the risk of rug pulls or blowup in a fully decentralized way. ENS keeps ticking on without a hitch. Fully decentralised derivatives are available on dYdX or GMX. All the innovative, experimental stuff thats going on with DAOs. There are many web3 products with real innovation and utility where your funds are guaranteed by immutable code. Not by the whims of a boy genius, or any self-aggrandising overlord.
My hope is as the moon boys, CeFi, web2.5, valley VCs, pump & dumpers leave the space, focus will shift back to the original crypto ideals. Self-custody, decentralisation, censorship resistance and privacy, pushing for more freedom in an increasingly authoritarian world. We need to get back to innovation and focus on “the real deal”.
Truly decentralised products are not the easiest to use. I’d imagine it might be hard for people not deep in the weeds of web3 to sometimes discern between the real deal vs some inevitable rug pull. The path forward for crypto has to be to finally stop using CeFi products altogether, to self-custody at all times and to make Defi as easy to use as its centralized counterparts. This is exactly where our focus has been and continues to be. I think this is fast becoming the consensus in the space. People who will remain in the space will likely double down on this. I am also feeling pretty good about our commitment to focus on DeFi blue chips. As they continue to work flawlessly and are deserving of the positive praise and attention they receive for that.
As a result of this shit show, all the participants in the space will likely focus on truly decentralised alternatives. These may have the disadvantage of being clunky to use in their current iterations and these are exactly the problems we have been and continue to focus on.
Those Degens who stick around during this prolonged crypto winter and continue to pay attention will perhaps get a chance to make life-changing fortunes from the knowledge garnered and opportunities presented.
Wrapping up
Frankly, I am shocked and furious at the recent state of affairs. I think this sets crypto back by years. I think the bear market will last a lot longer than people think. This is without question a major setback for the entire industry, but as long as there are idealists, decentralisation maxis, and cypherpunks to carry the torch in these dark times, we will reach the promised land, and we will be right there with you.
Oh, and fuck you very much Sam!