SBF might have spoiled dinner for everyone

Serious question: What do we think Sam Bankman-Fried is doing right now? Frying eggs? Eating breakfast? Reading the newspaper? I mean, what [Bloomberg]( Follow Us [Get the newsletter]( Serious question: What do we think Sam Bankman-Fried is doing right now? Frying eggs? Eating breakfast? Reading the newspaper? I mean, what does one do on a Sunday after the worst week of their life? Seven days ago, he had $16 billion. Today, he has $0. Do we think he’s … crying? I would cry: If you live under a rock, maybe you missed the financial earthquake of last week, so let me give you a quick refresher on how FTX went from hero to zero faster than the speed of light: - Who: The key players here are Sam Bankman-Fried (SBF, for short) and Changpeng “CZ” Zhao. - What: This is a mouthful, but … SBF’s crypto exchange FTX entered a [death spiral]( after CZ tweeted that his crypto exchange Binance would be selling its holdings of FTX’s FTT tokens “due to recent revelations.” This sparked a liquidity crisis at FTX, and CZ was like, “Whoa, Binance can help bail you out!” But then Binance did some due diligence and was like, “Sike! Why would we want to take over a [$6 billion black hole](??” which then sparked a full-blown solvency crisis at FTX, which Matt Levine explains [here](. Now SBF is filing for voluntary Chapter 11 proceedings for FTX and his crypto trading firm Alameda Research. Whew! Try saying that five times fast. - Where: On the blockchain … but also on Twitter. - When: The drama began [Nov. 6](, exactly one week ago. - Why: This is tricky! CZ is in some ways the catalyst here because he started selling a bunch of tokens … but, but, but: SBF had a lot of money tied up in the interconnected pockets of powerful people and he’s now [being investigated by the US Securities and Exchange Commission]( for potential violations of securities rules. It’s all pretty sketchy and dramatic! Lionel Laurent writes that SBF, now a prospective criminal, “[has in the past enjoyed media treatment akin to walking on water.](” You see, FTX used to be the crème de la crème of crypto. Anyone who’s anyone in the cryptoverse traded on the exchange. It was the place that bailed people out; the idea of it needing a bailout would have been blasphemous before last week. [The all-star rosters of their million-dollar ad campaigns]( alone would have convinced you to toss some pennies into the crypto pot: An interesting aspect of the FTX saga is the sheer speed of it. How did SBF’s crypto empire come crumbling down so fast? [A lot of it has to do with trust](, Kyla Scanlon says. Now, I know you probably didn’t celebrate your 16th birthday at the Melting Pot, but if you did, you’d understand what I’m about to say. [The rescue spoon]( is a crucial utensil at a fondue restaurant. When you lose your broccoli — and you will lose it — to the violent torrent of bouillon, you need the rescue spoon to save your vegetable from turning to mush. The traditional banking world’s fondue pot has plenty of trusty rescue spoons. There are people like Warren Buffett — he’s a rescue spoon. There’s JPMorgan — also a rescue spoon. There’s even the Federal Reserve, whose primary job is rescuing! These spoons will happily lend you the money to end your liquidity crisis, for a fee, of course. But in cryptoland, [there are very few rescue spoons](, and sometimes they’re made of plastic: In the grand scheme of business history, [FTX looks like a greatest-hits version of classic financial disasters](, Aaron Brown writes. The impact of FTX’s demise is already weighing on the crypto market, which has been slashed by two-thirds in less than a year, going from almost $3 trillion to less than $1 trillion. Ironically, we might have not reached this inflection point if it weren’t for Covid-19. [The global pandemic sparked waves of stimulus that stocked our economy with cash](, Robert Burgess explains. People had plenty of money to buy both physical Shiba Inus and digital ones. Over 7,000 tokens were born between 2020 and 2022. And it didn’t stop at coins: NFT trading soared to $17.6 billion last year, an increase of 21,000% from 2020. Today, the crypto frenzy has all but gone bust. If you’re getting major dotcom-bubble vibes from this chart, you’re not alone: Allison Schrager, for one, has been [secretly rooting for the day when crypto has no more spoons]( to rescue its mushy vegetables. “I'd feel a little guilty for rooting against crypto if its fall was the thing that tips the economy into a bad recession,” Allison says. But she argues that this episode is not going to implode the global financial system as we know it. Nor does it spell [the end of crypto](, Tyler Cowen writes. A FTX-less crypto market gives Binance an extremely prime position, if not a monopolistic one. A “dominant clearinghouse might be good for crypto” because it’d allow for more regulation and stability, which crypto is in dire need of at the moment. Bonus Crypto Reading - [Sam Bankman-Fried’s Apology Is as Hollow as His Empire]( — Lionel Laurent - [What Have We Learned From the FTX-Binance Debacle?]( — Bloomberg’s editorial board - [The Drama’s Back in Crypto, and Nobody's Happy About It]( — John Authers and Isabelle Lee Notes: To contact the author of this newsletter, email Jessica Karl at jkarl9@bloomberg.net. This is the Theme of the Week edition of Bloomberg Opinion Today, a digest of our top commentary published every Sunday. Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. You received this message because you are subscribed to Bloomberg's Opinion Today newsletter. 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