The crypto madness is ending – and about time too • The Register

Opinion With the quick one-two punch of FTX and Binance, crypto is finally losing its luster as the next revolution in money.

I was recently in Manhattan at the Linux Foundation and Fintech Open Source Foundation’s (FINOS) Open Source in Finance Forum New York (OSFF) 2022 event. There, the theme for the day was fintech. It was about how open source code and the cloud are revolutionizing how banks, financial companies and stock markets work with money. You know what we didn’t talk about? Crypto.

Crypto bros are still babbling about how their Bitcoin, Ethereum or what have you will go to the moon. They also insist that those with their diamond hands are going to Hold On for Dear Life (HODL) no matter what.

So sweet. In a pathetic way.

At the conference, the financial adults delved into topics such as data interoperability between platforms and applications and how to encourage bank executives to allow developers to contribute to open source projects.

Cryptocurrency? It was mentioned in passing. People would talk about it the same way you would talk about your little brother’s latest embarrassing TikTok video. That is, you will acknowledge that it happened, and quickly change the subject.

Why? Because while Bitcoin, for over a decade now, has been the poster child for crypto with its proof-of-work consensus mechanisms as an alternative to fiat currencies, such as the US dollar, recent events have shown that the crypto emperor is wearing no clothes.

Bitcoin’s value continues to fall. From its record high of $69,000 in November 2021 to, as I write this in mid-December 2022, it is worth $17,678. Inflation may be bad, but a “nearly 75 percent drop in value” is not bad.

At the same time, other related virtual goods have seen their market value plummet. Sales of non-fungible tokens (NFTs), for example, fell from $7.3 billion to $1.6 billion globally, a 77 percent decline according to NFT tracker Nonfungible. Organizers of perhaps the most famous NFTs, the Bored Ape Yacht Club, are being sued because their NFTs turn out to – shock! – has no lasting value: “The truth is that the company’s entire business model relies on using the underhand marketing and promotional activities of highly compensated A-list celebrities (without disclosing such) to increase demand for the Yuga Papers by to convince potential retail investors that the price of these digital assets will appreciate.”

Let’s assume you still believe in crypto, where can you keep or trade it? The former market-leading cryptocurrency exchange FTX has collapsed. The allegations are that FTX client funds were used to prop up CEO Sam Bankman-Fried’s private hedge fund Alameda Research.

Although other top crypto firms are not in as much hot water as FTX, things are starting to boil around them as well. Take Binance, for example. Panicked owners have withdrawn funds from the beleaguered Bitcoin exchange. To calm investors’ nerves, Binance asked accounting firm Mazars to provide a report on proof of reserves. While not a full audit, it would have reassured crypto speculators that Mazars was indeed good value for money. But then Mazars pulled the plug on crypto reporting. Any reasonable investor or user is going to ask themselves: is this a “temporary pause” or is it a sign that all is not well with Binance?

Even more well-known companies, such as Coinbase, are in trouble. The stock has been staggering in recent quarters. Recently, CEO Brian Armstrong said that the cryptocurrency exchange’s revenue is likely to be cut in half or more this year.

Let me be honest. From where I sit, this is the slow but sure descent into what has always been a gigantic Ponzi scheme. There has never – ever – been any real value in crypto. Yes, I know all the arguments about how fiat currencies have no intrinsic value either. You know what, though? If I go to the grocer, I can buy milk, bread and butter with my fiat dollars or pounds. Dogecoin? Garlicoin? Trump NFT trading cards? I do not think so.

I know. It’s hard to admit that you’ve been a financial fool for years or even a few months. I had friends in the 2000s who “knew” that Bernie Madoff would be able to deliver 20 percent returns a year forever. They were wrong. Some of them lost their homes. Everyone lost big money.

There comes a point where you have to stop throwing good money after bad. We are way past that point with crypto and NFT. At least with famous financial scams of the past, like the Dutch tulip bubble and the real estate crash of 2008, you had tulip bulbs and houses for your money when all was said and done. With crypto, you will be left with nothing but pointless, pointless, worthless blockchains. ®