Do not turn away from the faith (nd-aktuell.de)

For a long time, only one maxim seemed to apply to the parallel world of cryptocurrencies: higher, faster, further. After Bitcoin first hit the market 14 years ago, the number grew to over 9,000 different digital currencies. The tempting thing: Currencies, which are completely independent of state institutions and banks, advertise with the promise of being able to give investors immeasurable wealth in a very short time. How exactly is this supposed to happen? accessory. The important thing is not to lose faith. However, with the insolvency of what was once the second-largest crypto exchange, FTX, a few weeks ago, this supposedly never-ending success story took a big hit. In the scene itself, there is now talk of an impending long crypto winter.

What happened? After learning in mid-November that there was a gaping hole in FTX’s balance sheet of billions of US dollars and that a takeover by the largest crypto exchange Binance would fail, the company announced its insolvency. . Around one million people worldwide are said to have been defrauded on their deposits. According to reports, it is a sum of ten billion dollars. In addition to small investors, investors also included heavyweights such as the world’s largest asset manager Black Rock or a Canadian pension fund for teachers. The latter alone would have lost $100 million as a result of the bankruptcy.

Exchange rates are subject to extreme fluctuations

According to financial expert Sandra Navidi, the collapse of FTX once again makes it clear that cryptocurrency trading is nothing more than a fraud. “It has no intrinsic value, it is not a means of payment or a store of value,” she told the n-tv television channel. Former leftist politician and author Fabio De Masi takes a similar line. About the biggest cryptocurrency, he says: “Bitcoin has a real value of zero. The value of bitcoin is faith.”

Even though there are over 160 different currencies in the world, neither Bitcoins, Etherum, Binance Coin or whatever they are called are among them. With El Salvador and the Central African Republic, only two countries have so far introduced cryptocurrencies as an official means of payment. However, since these are not covered by any central bank that could guarantee fixed values, exchange rates are sometimes subject to extreme fluctuations. While Bitcoin’s first exchange rate in 2010 was around $0.07, last year it hit its previous high of $68,000 before falling to a new low for the year at less than $17,000. And this despite the fact that it is part of the founding myth of cryptocurrencies to be an inflation-proof guaranteed investment. Economist Maurice Höfgen comments on Twitter: “Anyone who traded euros for bitcoin a year ago to hedge against inflation and has to spend their money today only has a price loss of 66% in addition to the loss of purchasing power of 10% due to inflation.

In some circles, cryptocurrencies are a popular way to conceal payment methods – lately probably also to avoid penalties – but you can’t really make money with them, if at all, only through risky bets on possible price increases. That’s exactly what you could do with the FTX crypto exchange, which was valued at $32 billion at one point. Professional marketing may also have been decisive for success. FTX wasn’t just one of the biggest sponsors in esports. The company logo also adorned many sports facilities and teams in the analog version. Commercials featuring prominent casts such as model Gisele Bundchen and footballer Tom Brady also helped inspire investor confidence.

Storytelling as the basis of the company

The importance of good storytelling to the successful marketing of a potentially somewhat dodgy product was recognized by another colorful figure in the scene before FTX founder Sam Bankman-Fried. Just five years ago, the case of self-proclaimed crypto queen Ruja Ignatova caused a stir, with up to 20,000 people making the pilgrimage to her pompous peak-hour publicity events. With her company One Coin, she operated an illegal pyramid scheme disguised as cryptocurrency for several years, through which investors around the world lost more than four billion US dollars. While the 30-year-old FTX founder is currently being held in the Bahamas for fraud, money laundering and deceiving investors, Ignatova was able to escape in time. Since her disappearance, she has been on the FBI’s list of ten most wanted fugitives and is the subject of an international arrest warrant. It was only this summer that the security agency put a $100,000 bounty on the 42-year-old’s head.

And the crypto winter? While the latest events have caused some uncertainty among investors and rattled many other companies in the sector, others are already seeing an opportunity in the crisis. US investment bank Goldman Sachs, for example, has announced plans to take over a range of crypto companies. Mainly out of interest in the blockchain technology behind it, as they say. So even here all hope has not yet been given up, spring will likely follow winter in the crypto industry at some point. The only requirement: you just have to believe in it strong enough.