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[quote=Anonymous][quote=Anonymous][quote=Anonymous]People are confusing the question of whether decentralized cryptoassets like bitcoin are a worthwhile store of value or investment with what happened with FTX.

You can buy or sell crypto without an exchange as it was down in the earlier years of bitcoin and you can store it offline on a hard drive that you guard like a bar of gold.

An exchange, however, makes it much easier to buy and sell and, in principle, you don't have to worry about safeguarding the bitcoin you buy there because the exchange safeguards it for you.  In highly regulated exchange arrangements, this safeguarding is generally done through an arrangement with a highly regulated bank or broker dealer.

This did not happen with FTX because, as an exchange, it was very lightly regulated and it, not a bank or broker dealer, was the custodian of customer assets.  The owners of the exchange lent customer assets to a struggling trading affiliate, which immediately lost them on their bets and could not recover sufficiently to return the customer assets to the exchange.

The problem here is what the owners of the exchange did with customers' cryptoassets, not the cryptoassets themselves. It is a repeat of a crime we have seen over and over again over the decades in which a trustee pilfers the assets they are supposed to be protecting.

Whether decentralized cryptoassets like bitcoin et al are worthwhile stores of value or investments is a completely separate question, the answers to which shed no light on what happened in the FTX blow up, which just as well could have involved stocks, or foreign currencies, or pork bellies.

If you believe it does, you will miss the real lessons of FTX.[/quote]

But inherently how do you value a crypto asset? They were issuing FTT tokens, kept 98% on their books and sold 2% on “open market” (I’m guessing actually wash trade) and this set a “value” for the FTT tokens which they then used on their balance sheet. Any crypto has this artifact where they are thinly traded but claim to have certain values.  I guess they could do similar thing with stock issuance?[/quote]

FTT was not a decentralized cryptoasset.  It was issued by FTX, an exchange, which, by definition is not decentralized.

There was some value to the FTT token as users could do transactions on FTX for smaller fees, and as I understand it, could get some returns.  The latter feature made them something like stock.

FTX issuance of FTT, however, was profligate and much of it was bought by sister hedge fund Alameda.  Alameda then used the FTT tokens as collateral for loans it entered into and FTT is what it used as collateral for the customer asset it borrowed from FTX.[/quote]

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