Second, is the future of cryptocurrencies in jeopardy? After all, FTX was one of the few US crypto firms to invest heavily in lobbying, and Mr. Bankman-Fried was seen as a “white knight” who had the best chance of convincing skeptical lawmakers of the value of crypto. Now it seems those efforts have stalled at best — and regulators who want to portray crypto as an out-of-control Wild West have one more example to point to. Katherine Wu, a crypto investor, tweeted on Tuesday that it was a “really sickening news day – can’t even begin to estimate the potential damage our industry will face.”
Third, will the collapse of FTX lead to a broader market failure, as the collapse of Lehman Brothers did in 2008?
The news has already spread to the rest of the crypto market. The prices of Bitcoin and Ether both fell on Tuesday, and the price of Solana (a cryptocurrency that has backed FTX) fell about 20 percent. Shares in listed crypto companies, such as Coinbase, also fell. FTX’s investors, including Sequoia Capital, Lightspeed Venture Partners, and SoftBank, will most likely lose most or all of their investments. And given how intertwined FTX has been with the rest of the crypto economy, it may be a while before we know the full extent of the damage.
The hope, of course, is that unlike 2008, when the Wall Street collapse culminated in a global financial crisis that resulted in millions of Americans losing their jobs and homes, the fallout from FTX’s collapse will largely be confined to the crypto industry. . But it’s too early to say.
And finally, what will become of Mr. Bankman-Fried? Until this week, he was the undisputed king of crypto — and an increasingly powerful force in American politics, thanks to his large donations to Democratic candidates and causes. His fortune, estimated at more than $15 billion before the sale of Binance, has benefited philanthropists (he is a major donor to the effective altruism movement), media organizations (he is an investor in Semafor), and companies both inside and outside crypto. (he is a major shareholder of Robinhood, the stock trading app).
The time of mr. Bankman-Fried as a crypto mogul may be over. (On Tuesday, Bloomberg estimated that his wealth had fallen 94 percent and that he was no longer a billionaire.) But the bigger question, for crypto investors, is whether his empire was unusually shaky, or whether it was just the first to fall.
