As Americans continue to learn more about the different sides of the arguably little-understood world of cryptocurrency, scandals involving trading exchanges and banking systems have left many people who were already leery about crypto feeling distrustful.
But despite what some may think, others still firmly believe crypto represents the future.
So what do people need to know before investing?
What You Need To Know
- The FTX scandal, where crypto was meant to be used for one purpose, was misused by the company and put crypto in a bad light
- However, some say the scandal is more of a human problem
- From crypto’s beginning to its current status today, we take a look at what makes it so popular and yet so unknown
In February, federal prosecutors announced four more criminal charges against the founder of crypto trading platform FTC, including conspiracy to commit bank fraud and securities fraud.
FTX was supposed to be the standard.
“FTX was probably one of the most widely known brands in terms of cryptocurrency exchanges,” CryptoHedge Principal and Portfolio Manager Jeremy Knopp said.
A company that allowed and aided its customers in trading cryptocurrency digital assets: Bitcoin, Etherium and even Dogecoin.
“Sam Bankman-Fried had a pretty big name,” Knopp said. “He consistently conversed with a lot of different regulators, a lot of celebrities, things like that. He was widely known as a pretty smart guy in the world of crypto.”
A smart guy, perhaps, but was he a well-intentioned one? That has left many people wondering.
“Based on everything I’ve read, this certainly looks like a garden-variety fraud,” Cornell Law Professor Charles Whitehead said.
“Well, I think it had a massive affect on trust, right?” Knopp added.
Trust in not only one person, but an entire world that so many know so little about.
“Now you’ve got a lot of people that have this kind of black eye, I guess, because of FTX. But they’re also relating it to crypto,” Knopp said.
For most people, crypto as digital currency or digital asset is a relatively new concept. But the fact is, the idea was dreamed up 40 years ago, and it’s been in practice for the last 28.
“Well, I think people looked at it as if it’s kind of this, like, out there group of people that just are anti-government, anti-society. They just want to be able to kind of live on their own, on their own currency,” Knopp said of the time.
But is it just ahead of its time?
Little used, little thought of until 2009, when the paper that introduced Bitcoin, the White Paper, Bitcoin, a Peer-to-Peer Electronic Cash System, was posted to a mailing list. It opened a lot of eyes, including Knopp’s, and he turned his fascination, his interest with crypto into a career as a crypto hedge fund manager.
“I started to ask those questions of, ‘Is it going to be around long-term? What technological advantage does this bring?’” he said.
In 2009, Bitcoin for the first time changed hands in trading. But it was not until a year later, when the cryptocurrency was used to make a real-life purchase. It was two pizzas, delivered for 10,000 Bitcoins.
It was a concept back then, but today those coins are worth $280 million. Expensive pies, yes, but history was made.
“It was from that, research that was really found. Wow. I don’t think I’ve ever come across a bigger potential technological innovation since the internet. Really, this is kind of the next evolution,” Knopp said.
But as in life, what goes up must come down. As we see the price of Bitcoin and other cryptocurrencies fall and the scandal around them rise, it’s a market that Knopp still very much believes in because, he said, it’s about a lot more than just currency.
“I’m more certain now than ever that this is going to be much bigger than most people anticipate, and they’re going to affect more and more industries than most people anticipate,” he added.
