Friday, December 16, 2022
This week, 30-year-old Sam Bankman-Fried, the founder of FTX, was arrested in the Bahamas in relation to the billion dollar collapse of his crypto company.
It now appears that the rapid rise of FTX was based on a house of cards–billions of dollars are unaccounted for and thousands of people are unlikely to get their money back. Other crypto companies are trying to stay alive–over 3200 cryptocurrencies have already failed this year.
How did a company that in November was worth $32 billion crash into bankruptcy this quickly? This is what happens when valuations are based on market frenzy–without any underlying source of value.
In a manic craze like this, people want what you’re selling–whether it’s Beanie Babies of the 1980, the tulip mania in 17th century Holland, or crypto and NFTs in 2022. Prices rise quickly, but they can fall just as fast.
When something seems too good to be true, there’s a good chance it’s not. When you fly too close to the sun, you’re likely to get burned.
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