rogoff231_Tom WilliamsCQ-Roll Call, Inc via Getty Images_ftxbankman-fried Tom Williams/CQ-Roll Call, Inc via Getty Images

Will Crypto Survive?

With a storyline full of celebrities, politicians, sex, and drugs, the future looks bright for producers of feature films and documentaries about the astonishing collapse of FTX. But, to paraphrase Mark Twain, rumors of the death of crypto itself have been much exaggerated.

SAN FRANCISCO – The epic collapse of wunderkind Sam Bankman-Fried’s $32 billion crypto empire, FTX, looks set to go down as one of the great financial debacles of all time. With a storyline full of celebrities, politicians, sex, and drugs, the future looks bright for producers of feature films and documentaries. But, to paraphrase Mark Twain, rumors of the death of crypto itself have been much exaggerated.

True, the loss of confidence in “exchanges” such as FTX – essentially crypto financial intermediaries – almost surely means a sustained steep drop in prices for the underlying assets. The vast majority of Bitcoin transactions are done “off-chain” in exchanges, not in the Bitcoin blockchain itself. These financial intermediaries are vastly more convenient, require much less sophistication to use, and do not waste nearly so much energy.

The emergence of exchanges was a major factor fueling cryptocurrencies’ price growth, and if regulators come down hard on them, the price of the underlying tokens will fall. Accordingly, Bitcoin and Ethereum prices have plummeted.

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