NEWS YOU CAN USE: What You Need to Know about the Colossal Mess of FTX.
Every currency is maintained by a sufficiently widespread belief that the currency is currently worth something and will continue to be worth something in the foreseeable future. A currency’s value crashes when people no longer believe it is worth much, or worth anything at all.
FTX grew spectacularly fast. By March 2021, FTX had bought the rights to rename the home of the NBA’s Miami Heat as the “FTX Arena.” You may recall the Super Bowl commercial from this past February featuring Larry David, with the joke being that David didn’t understand cryptocurrency and thus was passing on investing in the next big thing — a pretty funny irony in light of recent events.
In August, Sam Bankman-Fried was on the cover of Fortune magazine, with a headline asking if he was the next Warren Buffett. He was touted like the other tech-industry boy-wonder geniuses, the next Steve Jobs, Bill Gates, or Mark Zuckerberg — a disheveled and casual wunderkind who had apparently discovered some key business secret or truth that had eluded the rest of us.
Sam Bankman-Fried does not look like the most powerful man in crypto. Friendly and rumpled, with an unruly halo of curly hair, the 30-year-old widely known as SBF has an affinity for League of Legends, fidget spinners, and other trappings of nerd culture. But underneath the goofy facade is a trading wunderkind whose ambition knows no limits.
An MIT physics grad, SBF honed his trading skills at renowned quant shop Jane Street Capital before launching a successful firm of his own, Alameda Research. In 2019 he founded crypto exchange FTX, hailed by some as the best derivatives platform ever built.
As recently as September, FTX was believed to be worth $32 billion. In addition to running the cryptocurrency exchange FTX, Bankman-Fried continued to run Alameda Research. This is like having the same person running the New York Stock Exchange and Bridgewater Associates, to pick a market and a hedge fund that are familiar to most people.
If you’re like me, you’ve felt like you didn’t really understand what the heck cryptocurrency was and didn’t bother investing in it. Well, our inability to understand these things really paid off in this case.