What is the post-FTX future of cryptocurrency? – Al Jazeera English

December 25, 2022 by No Comments

John Jay Ray III took control of the failed cryptocurrency exchange FTX in the small hours of November 11. Ray was asked in a US House Hearing on Financial Services to compare FTX to Enron, another financial debacle he cleaned up after. “This is just plain old embezzlement,” said Ray. “Not sophisticated at all.” FTX simply took customer money and used it for their own purposes.

FTX and its sister firm, cryptocurrency hedge fund Alameda Research, both operated out of the Bahamas, with zero oversight. At least $8bn in customer funds is now missing, causing cryptocurrency enthusiasts to rethink the future of finance and politicians to call for tighter reins on the cryptocurrency space.

Is this the end of cryptocurrencies?

“In its present form, yes,” Frances Coppola, an independent financial and economic commentator, told Al Jazeera. She pointed out that in its 14-year existence, the cryptocurrency world has failed to generate any significant real-world use case apart from the financing of crime. It has mainly been a speculative investment, which only worked as long as real dollars were entering the system.

“Crypto has never known anything but easy money,” she said. “Now central banks around the world are rapidly raising interest rates and unwinding quantitative easing. There’s a brutal liquidity squeeze going on in global markets, and money is being sucked out of risky asset classes.”

Cryptocurrencies have been about as risky as it gets. “The valuations that crypto was enjoying only a year ago are gone, and I don’t believe they will return for a long time, if ever,” she said. “I actually think crypto prices have further to fall. There’s still too much leverage in the space and central banks are by no means done with tightening yet,” she said.

Carol Alexander, a professor of finance at the University of Sussex, did not think cryptocurrency will disappear completely. She argued non-fungible tokens will definitely survive as metaverse development continues. “However, we are undergoing a shake-out now similar to the burst of the dot-com bubble with numerous small companies defaulting.”

Alexander believed that the survivors will be smart contract blockchains like Ethereum, a few regulated exchanges like Coinbase, and futures exchanges like the Chicago Mercantile Exchange.

Charles Whitehead, a professor at Cornell Law School in New York, agreed. “It may be too early to sound the death of crypto, but we are clearly late in efforts to regulate it,” he told Al Jazeera.

‘Get rich quick’

“The theoretical promise of cryptocurrency was a payment system not subject to the control of intermediaries,” Nicholas Weaver, a researcher at the University of California at …….

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