Some Things to Be Thankful For, Even Though Everything in Crypto Is On Fire
Crypto in November has basically been a mess because of the fall of FTX.
Enough doomscrolling. We’re entering the Thanksgiving (in the U.S.) and year-end holiday season. So here are some crypto-related things that I am, and you should be, thankful for.
There is much to be thankful for.
I am thankful that Bitcoin still works
Leave it to a bitcoin maximalist to make this about Bitcoin somehow. But it’s true. I am thankful that through all this turmoil, Bitcoin is ticking along. Blocks are still being mined and the network has nary a hiccup.
And not only is Bitcoin working, but bitcoiners are working. We’ve seen both meaningful discussions around self-custody (plus exchange outflows have broken historical records) and developers are developing new useful tools (plus an announcement of an announcement of an old idea).
What’s more, bitcoin is trading around $16,000. With public bitcoin miners struggling, the Grayscale Bitcoin Trust (GBTC) trading at a record discount to net asset value, Genesis Global Capital hiring a financial adviser after disclosing losses and suspending redemptions, and most bitcoin holders holding their bitcoins at a loss, bitcoin remaining steady around a $16,000 price level is nothing short of remarkable.
(Grayscale and Genesis Global Capital are both owned by Digital Currency Group, which also owns CoinDesk.)
Tick tock, next block.
Why you should be thankful: When times are tough, people show you who they are; so do crypto protocols. Times are tough and investors and enthusiasts alike should take solace in the fact that Bitcoin is a sewer rat and will come out of this stronger.
I am thankful the fallout isn’t really DeFi’s fault.
Of course, as a bitcoin maximalist, my main criticism of crypto’s decentralized finance (DeFi) sub-industry is that it is mainly used as a circular, closed-loop model for gambling. Things like yield farming, play-to-earn, liquidity pools and the like might have some utility, but it does seem that most are just different flavors of speculation on coins.
Still, the financial pain that has been wrought this month wasn’t DeFi’s fault. The failure of FTX was a failure of trusted third parties and people.
Why you should be thankful: Even if speculation is the use case for DeFi and crypto, there is something to be said that the protocols didn’t break when FTX went down. If you think companies and institutions should crop up around crypto, this is simply a lesson in building better companies and institutions rather than a declaration that there’s nothing to be built around this technology, movement or whatever.
I am thankful the fallout happened during a bear market.
Last week I wrote about FTX-related contagion: “Crypto is simply not big enough to have a serious impact on the broader economy.” I wrote something similar in May right after the Terra crash led to $40 billion in losses: “Except next time an undercollateralized, algorithmic stablecoin fails, it’s not going to be $40 billion of lost value. It might be $400 billion. That could be catastrophic.”
The crypto market is small now, so the tendrils of its reach are also small. This “contagion” should blow over without touching the non-crypto economy.
Why you should be thankful: Whatever dies in crypto because of FTX’s downfall dies without too many far-reaching effects.
I am thankful exchanges are considering proof of reserves.
Following the FTX bankruptcy filing, industry professionals were calling for exchanges to implement proof of reserves. Proof of reserves should provide an assurance to customers that exchanges are in fact holding their funds. (I wrote about it here.) A less-talked-about aspect of proof of reserves that should be more talked about is the idea that we might run into an issue regarding the total amount of circulating bitcoin crypto exchanges say they have.
Why you should be thankful: The ability to hold your own coins is part of the value proposition of most cryptocurrencies. From the perspective of the Bitcoin system, one of the value propositions is that there is a finite, provably scarce number of bitcoin. If exchanges were found to be circulating an amount in excess of the number of bitcoin issued (i.e., they are selling paper, fake bitcoins rather than real bitcoins) we could: a) out some bad-faith actors in the space and b) see some crazy price movement as the demand for “real, actual” bitcoin spikes dramatically.
I am thankful we have editorial independence at CoinDesk.
Lastly, a shameless plug and unprompted advertisement for my employer and colleagues. CoinDesk’s Ian Allison is the reporter who tipped the first domino that led to the FTX bankruptcy filing. All along the way we’ve been reporting fast and, often, first. Our reporting has led to market moves and ultimately to uncertainty for some of our sister companies (Grayscale, Genesis) and by extension our parent company DCG.
While skeptics still eye our attachment to our sister companies with a healthy cynicism (as they should: “Don’t Trust, Verify”), we’ve at least proven that we aren’t afraid to report when reporting is needed.
Read more: CoinDesk Ethics Policy
Why you should be thankful: Everyone has the right to accurate and timely reporting. You get that with CoinDesk. Whether you’re in the market for fast reporting to sync your risk model or in the mood to learn about the newest crypto trend or want to read about how mad David Morris is at Mark Zuckerberg, CoinDesk is here for you.
Also, I am most thankful for you, dear reader, for reading each week (at least, I hope you do).