"Not only has the biggest of the oligarchs seized control of an important social media platform, and restored a censored President to boot, the man is conducting his own private foreign and military policy”.
American oligarchs have always done that. I was sort-of close to the Rockefeller brothers for a few years and met some of the folks who helped them shape our foreign policy (all of whom were smart and cosmopolitan).
As to "the broader fallout on elite-mass relations,' SBF vindicated China's crypto ban, which saved a lot of electricity, heart- and wallet-ache while accelerating its central bank digital currency development.
As much as I would like Sen. Gillibrand to withdraw from public affairs in humiliation, we are talking
about a US senator - nothing would happen. She would still be on TV pretending to be an expert on matters her staff has briefed her for 3 seconds - ah, the august body that is US senate...
It's perhaps a bit late, but I would have some comments, if I may.
1. I think it’s quite a bit exaggerated to call a bunch of VC and PE firms "institutional money". In terms of "institutional money" they are but midgets with a huge risk appetite. And the amounts they have lost in this debacle is small even within their puny little world. Altogether they will have to write off maybe 1-2 billion. Out of close to 1 trillion in managed assets.
2. The SEC has bungled a lot in this. I agree. But I am willing to cut them some slack, as they are in a tough spot. I will come back to this.
3. I don’t think there's anything to be salvaged in terms of technology. (i) Programmable contracts already exist, but you can't engineer trust via AI, which was always the big, implied selling point on this. (ii) Tokenization provides better security, in theory. In practice, when the shit hits the fan (as it invariably has and will), you won't find the accountable and responsible party who could be forced to remedy. These attributes will have been atomized and distributed along with the ownership. (iii) Distributed ledgers are also still in search for their first, convincing use case: their security is nowhere, their performance is abysmal and any error correction is absurdly difficult, because they can only accept one version of the truth, which is a paradox in and of itself. – To cut to the chase: if in today's rushing world, after one and a half decades and some 2 trillion in funding thrown in, we still did not collectively manage to find one, good, compelling, universally acceptable raison d'etre for this technology that we could have also implemented in practice, we ought to throw it all in the garbage bin. Where it belongs, btw. We have bigger fish to fry.
4. Re. the previous point, Tobias Adrian wouldn't be the first failing to see the forest from the trees. Quite frankly, him being the overhyped model-fetishist that he is, it doesn't surprise me. His previous co-authors all had to learn to get away from him in order to start receiving some of the credit they in fact deserved much more than him.
5. I agree that EA is intellectual fraud. Crypto is of the financial (more common) variety. I don't follow the broader fallout argument, however. The majority of people investing may not have known or realized why crypto will never become money. But they felt it quite well. Most of them just wanted to get rich in a hurry, while avoiding to pay any taxes. Pulled by the alluring snake oil, pushed by the FOMO, they went in. That's it. I don't see Girard being explicative here. I don't see the big contamination domino unfolding. Everybody's nose is brown a bit, so these folks will be consumed by avoiding humiliation rather than by anything else, least of all the political fallout.
6. I am also quite pessimistic about the potential of this crisis to drive any meaningful reform, even if we limit ourselves to the crypto realm. And so this is where I would like to come back to point no.2.
Man, I have to give it to these crypto guys, despite the likely fact that it was nowhere near their intentions, they have created a completely new asset class with much of crypto. One that is completely new and pretty much useless, too. In all things crypto we hitherto basically have got a purely speculation-driven asset type. But any such asset is devoid of economic substance, unless, as it was declared at the outset, it wants to become money itself. (Which of course it can't, but it would be too long to explain here why.)
This, however, is the crux of the problem the SEC is (and all other regulators for that matter are) exposed to: they all thought they had a complete asset typology already and the job would have been to find the correct type crypto belonged to. This was a mistake, which misled them entirely. (And I mean those people at the regulatory institutions, who had a relatively good grasp of the underlying issues, not those who themselves became crypto-enthusiasts. However, at least we now know who they are.) Unfortunately, by now they have invested too much time, effort and fame, to backtrack.
So, to underpin my pessimism, I think the US will find it particularly difficult to take decisive steps here, and not only due to the institutional patchwork either. While I will wait for the US Courts to reach their verdicts (which still could take years), I am rather convinced that crypto assets (in general) do not qualify as securities under the Securities Act. I don't see how one could prove that any crypto asset would pass the common enterprise prong of the Howey test. Maybe the Courts will reach a different final verdict, but for me this is a non-starter. On the other hand, I also fail to see the political backing for any overarching legal prohibition. Not to mention the (technical and legal) difficulties in enforcing such a law. I am not sure Congress would want to step into this minefield in any shape or form. Many of its members most likely have brown noses themselves.
Now, while the US was bogged down in legal disputes, the EU has regulated crypto (MICA Regulation). But in essence, it is a hot pile of mess, again revealing of what a regulation-prone paper tiger the EU is. (Get this: MICA has a separate article on the form and contents of the white paper. With it, the EU legitimizes the fraud by establishing criteria for it. Satoshi is ROFLing, no doubt.)
7. I see crypto as neither a minor blip, nor a catastrophe. For me it's a symptom. I'd expect it to still linger on for a while and then to fade down to something marginal. Like a mistake we never apologized for.
Tooze analyzed the immediate financial impact of the debacle, not future investments or lack thereof, by my reading. In that sense he appears to be spot on, and your slanted, forward-looking doesn’t warrant consideration.
Your 3 points are reasonable but it is clearly far too early to say if they are valid.
In particular: FTX wasn't a primary player in DeFi - which is where all the action seems to be now. Yes, they put money into Solana but SBF/FTX put money into everything. And most importantly, it is 100% clear that FTX/SBF were not the primary funders (or even in the top 10, I suspect) in the venture crypto space - if we exclude the money which was poured into failing tokens/lenders etc. I personally lean towards excluding that Ivar Krueger-esque Match King behavior as it was clearly intended to build up the FTX/SBF image as opposed to create new value in a new area.
Institutionally - the venture money lost in FTX was a drop in the bucket. A few hundred million lost on a single venture by Sequoia is pretty much par for the course for them.
Well said!
"Not only has the biggest of the oligarchs seized control of an important social media platform, and restored a censored President to boot, the man is conducting his own private foreign and military policy”.
American oligarchs have always done that. I was sort-of close to the Rockefeller brothers for a few years and met some of the folks who helped them shape our foreign policy (all of whom were smart and cosmopolitan).
As to "the broader fallout on elite-mass relations,' SBF vindicated China's crypto ban, which saved a lot of electricity, heart- and wallet-ache while accelerating its central bank digital currency development.
As much as I would like Sen. Gillibrand to withdraw from public affairs in humiliation, we are talking
about a US senator - nothing would happen. She would still be on TV pretending to be an expert on matters her staff has briefed her for 3 seconds - ah, the august body that is US senate...
It's perhaps a bit late, but I would have some comments, if I may.
1. I think it’s quite a bit exaggerated to call a bunch of VC and PE firms "institutional money". In terms of "institutional money" they are but midgets with a huge risk appetite. And the amounts they have lost in this debacle is small even within their puny little world. Altogether they will have to write off maybe 1-2 billion. Out of close to 1 trillion in managed assets.
2. The SEC has bungled a lot in this. I agree. But I am willing to cut them some slack, as they are in a tough spot. I will come back to this.
3. I don’t think there's anything to be salvaged in terms of technology. (i) Programmable contracts already exist, but you can't engineer trust via AI, which was always the big, implied selling point on this. (ii) Tokenization provides better security, in theory. In practice, when the shit hits the fan (as it invariably has and will), you won't find the accountable and responsible party who could be forced to remedy. These attributes will have been atomized and distributed along with the ownership. (iii) Distributed ledgers are also still in search for their first, convincing use case: their security is nowhere, their performance is abysmal and any error correction is absurdly difficult, because they can only accept one version of the truth, which is a paradox in and of itself. – To cut to the chase: if in today's rushing world, after one and a half decades and some 2 trillion in funding thrown in, we still did not collectively manage to find one, good, compelling, universally acceptable raison d'etre for this technology that we could have also implemented in practice, we ought to throw it all in the garbage bin. Where it belongs, btw. We have bigger fish to fry.
4. Re. the previous point, Tobias Adrian wouldn't be the first failing to see the forest from the trees. Quite frankly, him being the overhyped model-fetishist that he is, it doesn't surprise me. His previous co-authors all had to learn to get away from him in order to start receiving some of the credit they in fact deserved much more than him.
5. I agree that EA is intellectual fraud. Crypto is of the financial (more common) variety. I don't follow the broader fallout argument, however. The majority of people investing may not have known or realized why crypto will never become money. But they felt it quite well. Most of them just wanted to get rich in a hurry, while avoiding to pay any taxes. Pulled by the alluring snake oil, pushed by the FOMO, they went in. That's it. I don't see Girard being explicative here. I don't see the big contamination domino unfolding. Everybody's nose is brown a bit, so these folks will be consumed by avoiding humiliation rather than by anything else, least of all the political fallout.
6. I am also quite pessimistic about the potential of this crisis to drive any meaningful reform, even if we limit ourselves to the crypto realm. And so this is where I would like to come back to point no.2.
Man, I have to give it to these crypto guys, despite the likely fact that it was nowhere near their intentions, they have created a completely new asset class with much of crypto. One that is completely new and pretty much useless, too. In all things crypto we hitherto basically have got a purely speculation-driven asset type. But any such asset is devoid of economic substance, unless, as it was declared at the outset, it wants to become money itself. (Which of course it can't, but it would be too long to explain here why.)
This, however, is the crux of the problem the SEC is (and all other regulators for that matter are) exposed to: they all thought they had a complete asset typology already and the job would have been to find the correct type crypto belonged to. This was a mistake, which misled them entirely. (And I mean those people at the regulatory institutions, who had a relatively good grasp of the underlying issues, not those who themselves became crypto-enthusiasts. However, at least we now know who they are.) Unfortunately, by now they have invested too much time, effort and fame, to backtrack.
So, to underpin my pessimism, I think the US will find it particularly difficult to take decisive steps here, and not only due to the institutional patchwork either. While I will wait for the US Courts to reach their verdicts (which still could take years), I am rather convinced that crypto assets (in general) do not qualify as securities under the Securities Act. I don't see how one could prove that any crypto asset would pass the common enterprise prong of the Howey test. Maybe the Courts will reach a different final verdict, but for me this is a non-starter. On the other hand, I also fail to see the political backing for any overarching legal prohibition. Not to mention the (technical and legal) difficulties in enforcing such a law. I am not sure Congress would want to step into this minefield in any shape or form. Many of its members most likely have brown noses themselves.
Now, while the US was bogged down in legal disputes, the EU has regulated crypto (MICA Regulation). But in essence, it is a hot pile of mess, again revealing of what a regulation-prone paper tiger the EU is. (Get this: MICA has a separate article on the form and contents of the white paper. With it, the EU legitimizes the fraud by establishing criteria for it. Satoshi is ROFLing, no doubt.)
7. I see crypto as neither a minor blip, nor a catastrophe. For me it's a symptom. I'd expect it to still linger on for a while and then to fade down to something marginal. Like a mistake we never apologized for.
"SBF was the Dems’ and the professional class’s answer to Musk"
This is an odd statement. Is there a reason why SBF warrants such a designation over, say, Bill Gates?
Tooze analyzed the immediate financial impact of the debacle, not future investments or lack thereof, by my reading. In that sense he appears to be spot on, and your slanted, forward-looking doesn’t warrant consideration.
Your 3 points are reasonable but it is clearly far too early to say if they are valid.
In particular: FTX wasn't a primary player in DeFi - which is where all the action seems to be now. Yes, they put money into Solana but SBF/FTX put money into everything. And most importantly, it is 100% clear that FTX/SBF were not the primary funders (or even in the top 10, I suspect) in the venture crypto space - if we exclude the money which was poured into failing tokens/lenders etc. I personally lean towards excluding that Ivar Krueger-esque Match King behavior as it was clearly intended to build up the FTX/SBF image as opposed to create new value in a new area.
Institutionally - the venture money lost in FTX was a drop in the bucket. A few hundred million lost on a single venture by Sequoia is pretty much par for the course for them.
Crypto is the fentanyl of finance ™️☠️💃
Contemplate the difference between the bursting of equity bubbles and debt bubbles.
Equity bubbles are damaging when they burst. Debt bubbles are catastrophic when the blow up.