Crypto — investor incompetence and the endless miseries of FTX

‘Every hour of the past seven days has seen a new claim of malfeasance that exceeds the depravity of the last’ — Peter McCormack, UK journalist and podcaster.
I have been writing this crypto column for about six months. It used to be fun. I bounced around from this shiny thing to that sparkly thing — NFTs, cryptocurrencies, Metaverse, DAOs, Gamefi, Defi, DIDs and other crypto toddlers, reporting gaily on their clumsy totterings as they tried to walk on to the world stage.
Then FTX and Sam Bankman-Fried happened. And now that is the only story in crypto, consuming this column for four weeks running.
It is endless in its manifold miseries. Not so much fun. I hope never to write a column about FTX again.
A recap. Smart young guy starts an exchange to allow people to buy cryptocurrencies with their real-world currencies. He takes custody of the money, buys the cryptocurrencies on the blockchain, and holds the keys to access the money on the blockchain (the first big no-no — never allow someone to take custody of your keys). Unbeknown to most, the guy has racked up debt in another company he owns and so he steals his exchange customers’ cryptocurrencies to keep the other company afloat.
The FTX story isn’t that hard to understand, but I’ll say it differently to make a point.
You, a six-year-old schoolgirl, give a dollar to your sweet seven-year-old cousin Sam to buy some chocolate for you at the tuckshop when you are hungry, because Sam knows the guy behind the counter and says he might also get him to add a lollipop for free. You trust your cousin — everyone does — because he is so lovable. But your cousin is secretly a dodgy gonif (thief) who has been losing heavily in the playground marbles game.
Sam buys some marbles with your money and keeps playing, hoping to win back his losses. But he is a terrible marbles player, especially because it has rained recently, and the ground is rutted and stony. Your dollar is gone forever. It sits with this guy who sells the marbles, and he is not giving it back.
Casino built on a Ponzi
FTX went something like that, give or take. Although much more labyrinthine in its details. As macroeconomist Lyn Alden so aptly described it — a casino built on top of a Ponzi.
You’ll notice something about this story, though. It has nothing to ...