Why crypto market is down & Sleazy – Spotlight

Why crypto market is down & Sleazy

Last month, the actions of a single cryptocurrency firm — the $32 billion exchange FTX — threw the emerging industry into its own version of the 2008 financial crisis. FTX, once thought to be a safe marketplace for people to trade virtual currencies, declared bankruptcy following the crypto equivalent of a bank run, forcing industry executives, investors, and enthusiasts to grapple with how a technology meant to correct traditional finance’s flaws ended up replicating them.

Executives who were reveling in crypto’s seemingly unstoppable growth a year ago are now scrambling to demonstrate that they can learn from their mistakes and recapture the industry’s early ideals.

Coinbase, the largest cryptocurrency exchange in the United States, declared its commitment to a “decentralized system where you don’t have to trust us.”

Many cryptocurrency supporters are calling for more drastic changes, urging investors to avoid storing their digital holdings with large corporations and instead turn to more experimental platforms run entirely by code.

Begginnings of Crypto

A document circulated not long after several Wall Street banks failed in 2008, proposing a new type of financial system that would not rely on any “trusted third party.”

The paper served as the foundation for the cryptocurrency industry. It promised to conduct business in a transparent and egalitarian manner, rejecting the high-risk practices of a small number of powerful financial firms that caused the Great Recession.

The beginnings of cryptocurrency can be traced back to 2008, when a mysterious figure known as Satoshi Nakamoto published a white paper on Bitcoin, outlining a detailed vision for what would become cryptocurrencies. The paper described Bitcoin’s technological foundation, which was a publicly viewable ledger known as a blockchain, in which transactions would be recorded for all to see.
Early supporters believed Bitcoin could serve as the foundation for a more transparent, egalitarian financial system. Many of the paper’s supporters were libertarians who had grown tired of traditional finance, particularly the concentration of power among a few large corporations.

Initially, the primary application of cryptocurrency was criminal. Thieves and drug dealers used Bitcoin to transfer large sums of money without the use of a bank or another intermediary.
However, as law enforcement became more adept at tracking crypto crime, the technology evolved to allow for more sophisticated financial applications such as borrowing and lending. People who began their careers on Wall Street, such as FTX’s founder, Sam Bankman-Fried, who worked at the trading firm Jane Street, became involved in the nascent industry, hoping to profit from the technology

As the industry grew, it began to resemble some of the Wall Street institutions that it was intended to replace. Crypto trading became increasingly centralized, with the majority of transactions taking place on a few large exchanges such as Binance, FTX, and Coinbase. According to an industry data tracker, in the months leading up to FTX’s demise, the trading volume of cryptocurrencies on Binance alone was greater than the combined totals of its seven closest competitors.

According to Charley Cooper, managing director at blockchain company R3, the original vision of crypto “was an attempt to rewrite the rules of finance on a global scale.” “And here we are again — we’re in an industry that is even more centralized than banking.”

Fall of Crypto Market

Until May, the value of cryptocurrencies skyrocketed last year and into 2022. That’s when the popular cryptocurrency Luna crashed, sending the crypto economy into a tailspin. Celsius Network and Voyager Digital, two major lending companies, have declared bankruptcy. Enthusiasts bemoaned the start of a “crypto winter” of low prices and waning enthusiasm.

Last month, the actions of a single cryptocurrency firm — the $32 billion exchange FTX — threw the emerging industry into its own version of the 2008 financial crisis. FTX, once thought to be a safe marketplace for people to trade virtual currencies, declared bankruptcy following the crypto equivalent of a bank run, forcing industry executives, investors, and enthusiasts to grapple with how a technology meant to correct traditional finance’s flaws ended up replicating them.

Source : NY Times

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