While Cryptocurrency is not a new innovation, its explosion with the masses during COVID left it wide open for corruption and mismanagement. As a result, Crypto firms like the widely reported FTX and now Genesis Global Capital have gone belly up. Insider trading, theft, and misrepresentation have abounded, and the investors in these coins have paid dearly. Many are left with little to no recourse for lost funds either.
What experts originally termed a “crypto winter” has now persisted for months. With Bitcoin down 70% from its all-time high in November 2021, many wonder if they’ll even be able to walk away without losing money. With this kind of crash people around the globe have become more cautious about investing their money in crypto, and many are failing to see it as a viable long-term asset going forward. There are three areas the future of crypto depends on.
Handling The Fallout of FTX
As founded by now-jailed 30-year-old Sam Bankman-Fried, FTX has been one of the biggest crypto crashes to date. Just one year ago the company was valued at $32 billion but is now completely bankrupt. With Wall Street’s top cop, the Securities and Exchange Commission (SEC) looking into Bankman-Fried as perpetrating a long-term fraud scandal.
While hundreds of thousands of customers are now stuck holding nothing but their breath as their assets are gone, the founder faces just eight criminal counts, but should he be found guilty he could face life in jail. The charges may disrupt his life, and kill the money of many others, but they also shed important light on the inner workings of crypto. With the close relationship between FTX and now defunct BlockFi, the spread of FTX’s rot has been quick and catastrophic.
Regulation Without Corruption
The SEC has already found their way into the crypto space, and many are already unhappy about that. A central idea of crypto has been keeping federal governments out of it. Once politicians get their hands on an investment or financial system things are never the same. The well becomes tainted, and it becomes impossible to put faith in, much less money.
While the SEC has done some things in the best interests of consumers by going after Genesis and their sister company Gemini. The duo had failed to register their lending program with the SEC, which was a serious violation of securities law. A case like this in conjunction with the FTX downfall has been proof that there needs to be a level of regulation to keep things on the up and up.
As much as the idea of openly posted exchanges of funds hidden by code sounds good, many “washing” services can quickly and easily hide the source of large amounts of currency in a matter of moments. This is what the feds accused the mob of and led to RICO cases.
Reestablishing trust
With the crash in pricing as well as the last of good press in years, many cryptocurrencies lack trust in the public eye. The people who would have invested a good amount of money in the fund are now too concerned about the safety of that investment. While savings accounts return less than inflation, for decades they were the way to go. Certificates of Deposit (CDs) were the way to go since the mid-80s, with many using these along with savings bonds to pay for college.
Investing in foreign currency was a lesser-known way of making money. While those near the border may frequently know the price of a neighboring country’s currency, you needed to know the other country inside and out to make real money by investing in their currency. Especially if they are across the globe. Many saw crypto as a way to do this, but without the potential volatility. Nobody expected to get robbed by the very exchanges they used
Until crypto can resolve these issues, many people will not give it a real opportunity. The trust will of course be the biggest thing to rebuild, and that will take time as well as proof of it being profitable again. For now, it’s going to be a very bumpy road.
