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It is not being a good year for the cryptocurrency market.
The accelerated growth during the pandemic was fueled by a strong concentration of capital, a lack of regulation, the appearance of simple applications for the uninitiated and the media hit from Gamestop.
But all of that came to an abrupt end in May with the collapse of Terra/Luna.
Since then, hedge fund (or portfolio management) Three Arrows Capital, hedge platform Celsius, and cryptocurrency broker Voyager Digital have disappeared.
There have been massive layoffs at Gemini, Coinbase, Crypto.com, BlockFi, and also at OpenSea, the NFT exchange.
Its latest victim, the world's fourth-largest cryptocurrency exchange, filed for bankruptcy on Friday.
In less than 72 hours, the FTX empire, valued at 32.
000 million dollars, disappeared leaving a hole of 8,000 and more than a million victims.
It is unlikely that they will get their money back and if they do, it will be very soon.
They call it crypto winter, but these are not rare occurrences in the unregulated world of cryptocurrency.
On the contrary.
The original bitcoin
exchange
(or web exchange), Mt. Gox, a business based in Japan, where 70% of operations were concentrated, disappeared in 2014, leaving a hole of 850,000 bitcoins, then valued at 500 million dollars. .
The platform argued that they had lost 744,408 bitcoins in a theft.
Some of that money was later laundered on BTC-e, an
exchange
especially popular with
hackers .
and criminals whose founder might have participated in the abduction.
Eight years and numerous collapses later, cryptocurrency investing is still not subject to the regulations or guarantees of a bank or a casino, but it continues to perform the functions of both.
The Bank for International Settlements (BIS) published a report on the crypto market between 2015 and 2022 on Monday indicating that between 73% and 81% of new investors lose money.
Most are men under 35 years of age.
The
exchanges
work like the Stock Market, with two differences.
The first is that they operate from tax havens to avoid financial regulation and not undergo real audits.
The second is that its clients deposit their money on the
exchange itself,
as if it were a bank.
Apparently, FTX founder and CEO Sam Bankman-Fried had used billions of dollars deposited by FTX clients to cover the losses of his own venture capital fund, Alameda Research.
In exchange, he had deposited then-equivalent amounts of his own cryptocurrency, FTT, as a guarantee of repayment.
When FTX investors wanted their money back, FTT was worthless.
Bankman-Fried has called it a “liquidity crisis”, but it is really a solvency crisis: they have exchanged their clients' money for a piece of paper that says “clients' money”, but it has no value.
That is a pattern that is repeated in the world of cryptocurrencies, along with others.
After declaring bankruptcy,
FTX reported that their system had been hacked and they had lost most of their money.
FTX was based in the Bahamas.
Binance, the largest
exchange
in the world, is based in the Cayman Islands and the Seychelles.
Regulation is an imperfect but necessary tool.
The crypto market is based on infrastructures deliberately designed to protect its movements from monitoring not only by the State, but also by its own clients.
To become a legitimate cog in the financial machine, it needs to emerge, like the rest of the financial system, out of the obscurity of tax havens.
