FTX and Bitcoin: The Good, the Bad, And The Ugly

This opinion editorial is by Mickey Koss. He is a West Point grad with an economics degree. After serving four years in the infantry, he was transferred to the Finance Corps. My first instinct when asked by one of the editors of Bitcoin Magazine what the FTX crash meant for bitcoin was “Tick-tock the next block.” After some reflection, I realized that it was difficult to present this scenario in a single dimensional way. My mind immediately turned to an old Clint Eastwood movie, “The Good, The Bad and The Ugly,” which provides the perfect frame for my thoughts about this still-unresolved predicament. The GoodThis scenario has one positive outcome. It’s the realization that centralized exchanges might not be your friend. Talks with (relatively normal) people about self-custody end in the expression of fear that they won’t be able to hold their keys. Caitlin Long points it out below that a large exchange may not be very good at it. Caitlin Long, LinkedIn CoinTelegraph, a cryptocurrency news company, reported two days ago that $3 billion worth bitcoin had left exchanges during the week before the publication of the 13 November 2022. If you are an expert on Bitcoin, this is a significant announcement and could be one of the best outcomes, if not the only, from this whole mess. Self-custody reduces the risk that their counterparty will lose their bitcoin and also makes it more difficult for exchanges to issue paper Bitcoin IOUs. Warren Buffet stated, “It is only when the tide goes away, that you discover who’s swimming naked.” Self custody allows you the freedom to just relax and enjoy the show. Elizabeth Warren, BadSenator, and others are calling for “a major cryptocurrency bill.” Politicians now have an opportunity to use the moment of the collapse in an unregulated offshore altcoin casino to make some progress. “Sen. Elizabeth Warren (D-Mass.) Tuesday’s statement by Senator Elizabeth Warren (D-Mass.) stated that a bill on digital currency must be comprehensive. It must cover consumer protections, anti money laundering rules, and climate safeguards for cryptocurrency mining. Senators Cynthia Lummis (Senator) and Kirsten Gillibrand (Senator) argue that the U.S. has been at a regulatory disadvantage because of the lack of action on crypto legislation in the past years and months. Ironically, one of crypto bills under review was written with the assistance of FTX. “The bill was introduced by Senator John Boozman (R. Ark.) and Debbie Stabenow (D.Mich.), Senate Agriculture Chair. The bill is being scrutinized in the wake the FTX collapse, as the company was a major lobbying influence behind it. Gary Gensler, the Chair of the SEC, has stated that the proposal is too light-touch. “While U.S. regulation could provide some much-needed clarity to institutions, a rushed package that addresses an emergent issue may result in an inferior product for the markets. I hope that legislative gridlock will slow down the process to allow for a more thoughtful and well-thought-out piece of legislation. UglyBBC News reported that FTX owes over a million people money. It is not clear who will be paid back, if anyone, or how much. It’s easy to criticize day traders and crypto token gamblers for not taking ownership of their coins. But the picture is much more complicated than that. Friends and family members who were concerned about self custody held their assets at BlockFi. Their coins are frozen in limbo and they are unsure when, if ever, they can withdraw. The fallout from FTX continues to unravel and I’m sure there will continue to be collateral damage in the coming weeks. Keep Your Head Up and Stack Sats. While it is tempting to bash on the illegal and unethical activities of FTX or SBF, it is best to keep your head down. These are the situations that will produce the next generation self-custodial bitcoin maxis. We must seize this opportunity to lead and teach. I was just months away from starting writing for Bitcoin Magazine when the Celsius crash happened. Sometimes, we don’t even know what we don’t know. Help them see the light. This guest post is by Mickey Koss. These opinions are not necessarily those of BTC Inc. and Bitcoin Magazine.

 

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