FTX killed cryptocurrency, long live Bitcoin

Haru Invest

The collapse of FTX revived the “Bitcoin maximalists were right all along” narrative.

Given the size of the troubled exchange and the number of entities that have gone online, the FTX scandal has dominated the headlines recently.

Worse, each passing day brings further twists and turns that point to serious failures within the company and among the regulators who are supposed to prevent such scandals in the first place.

In particular, questions relate to Sam Bankman-Fried’s (SBF) political influence and connections, as well as FTX’s apparent “transition” to the Securities and Exchange Commission (SEC).

Behind the veil of high-profile sports and celebrity endorsements, FTX has managed to build a solid reputation in a relatively short three and a half years. While skeptics say the red flags are always there, that’s no consolation to the FTX earners and big losers.

At the heart of the scandal is FTX’s native FTT token and the way it is managed. During a liquidity stress test, it struggled to justify its high pre-collapse market value of $3.4 billion.

The net result of the scandal is billions in lost funds and an industry struggling to maintain little reputation and credibility.

Certainly, the bankruptcy has spawned a new wave of Bitcoin maximalism, and as some say their vitriol against sh*tcoins has proven time and time again remarkable.

In response, self-control Bitcoin

The leading cryptocurrency is simple in design and a dinosaur by all accounts in terms of technology. However, Maxis notes that the same “flaws” make Bitcoin the only digital asset to hold.

On the basis that Bitcoin has no control foundation, perverse incentives, or privileged groups, maxis argues that the principles of decentralization, transparency, and immutability apply only to BTC.

While passionately defending this idea, the bitcoin crowd has in the past been labeled toxic and narrow-minded. However, the events of the past week demonstrate some truth, at least from an anti-Ponzinomics perspective as applied to exchange tokens.

With hit after hit from Celsius, BlockFi, Voyager, Terra Luna and more, the penny is starting to drop. Trust, simplicity and honesty trump income and short-term gain.

As the industry emerges from the FTX black swan, the BTC maxi move will intensify.

Altcoins are “bad”

Ten-chain analyst Jimmy Song wrote a long piece about the “moral case against altcoins.” He covered a number of points against altcoins, including the bogus approach to BTC’s legitimacy and the impact of short-term incentives from VCs.

He argued that “altcoins are evil” and merely mirror the fiat system, but in a new package. By doing so, their proliferation will not lead to financial freedom, which is often the goal of many people entering the crypto space. On the contrary, the existence of altcoins confuses cryptocurrency from the point of view of acquiring the real thing, namely Bitcoin.

In addition, Song argued that the altcoin space is hindering the adoption of Bitcoin, thus preventing those who need it the most from getting it due to the attention being drawn to newer, flashier projects.

“Altcoins are a hotbed of theft, nepotism and rent-seeking. Altcoins build themselves on the reputation that Bitcoin has worked so hard to achieve. They enrich VCs and altcoin pumps at the expense of the poor and vulnerable.

Most would have dismissed such views in the past as extreme or perhaps too black and white. But this year, the ongoing CeFi scandals have pushed more people to accept these points.

Data on the chain suggests that the penny has dropped

Despite selling pressure impacting the Bitcoin price in the near term, long-term HODLers continue to believe.

The HODL Waves chart shows the amount of BTC in circulation divided into age groups that represent the last time the supply was moved.

The chart below shows strong growth in the 10+ age group. This is a noticeable pattern since 2020. However, the >10y wave continues to widen as the BTC price falls.

What’s more, the overall age ratio is 76% – an all-time high.

Bitcoin HODL wave
Source: Glassnode.com

Analysis of active supply over broader time ranges shows a general upward trend across all categories for more than a year. The most active group since 2022 is the red group 1+ years ago, indicating that relatively new participants have become maxi.

Bitcoin supply is a finite asset
Source: Glassnode.com

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