{"id":11391,"date":"2022-12-04T23:44:35","date_gmt":"2022-12-04T21:44:35","guid":{"rendered":"https:\/\/www.liberalglobe.com\/?p=11391"},"modified":"2022-12-04T23:44:37","modified_gmt":"2022-12-04T21:44:37","slug":"ftx-bankruptcy-ftx-assets-with-no-real-value","status":"publish","type":"post","link":"https:\/\/www.liberalglobe.com\/?p=11391","title":{"rendered":"FTX Bankruptcy: FTX-Assets with no Real Value"},"content":{"rendered":"\n

We have become accustomed to considering financial success anything that appears to have large revenues and profits, ignoring what exactly is happening, where those revenues come from, and how those profits are generated.<\/p>\n\n\n\n

Worse, we have become accustomed to thinking that the ideal model of an investment is one that produces wealth out of nothing \u2013 literally \u2013 a peculiar fantasy akin to the myth of Midas.<\/p>\n\n\n\n

The fact that new technologies are now involved in the production of such bubbles only makes things worse. The case of Sam Bankman-Freight and the company FTX, a cryptocurrency trading company, is very typical.<\/p>\n\n\n\n

As you know FTX was a very dynamic group organized around a cryptocurrency trading platform. His total value reached 32 billion dollars. The company had aggressive advertising and was one of the best known in its industry. By 30, Bankman-Freid himself had a personal fortune of $24 billion, was one of the largest donors to the Democratic Party and had close ties to Wall Street. Essentially, the epitome of the modern success story was being dealt with.<\/p>\n\n\n\n

But, that image no longer exists. FTX has filed for bankruptcy, following a mass withdrawal of traders in response to reports that the company had serious mismanagement issues.<\/p>\n\n\n\n

Cryptocurrencies are not currencies<\/strong><\/p>\n\n\n\n

The problem starts with the very way cryptocurrencies are treated as an investment field. Despite the effort of those involved in this market and investing in it to convince that cryptocurrencies have real value derived from the way they are mined (in itself a particularly burdensome process on the environment), it is clear that the attraction of investors arises precisely from the way around a profitable dynamic can be formed from them. That is, for there to be demand and this causes the price to rise and this gives the feeling that wealth is being created. Essentially, cryptocurrencies are something that gains value precisely because those who participate in this market decide to do so and because they invest in them and want to see their value increase.<\/p>\n\n\n\n

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It is true that this mechanism is an organic element of many markets. Stock markets are one such example. The incentive to invest in shares is not the dividend that will be received, but the fact that the shares acquired will become even more valuable, which usually arises precisely because there is a demand for them, with increased value causing increased demand, etc. .K. until the time of “correction” comes of course.<\/p>\n\n\n\n

But there is at least one reference to the supposed true state of business, although often companies have gone up in stocks simply because there is a general trend. The same applies to money markets. The fact that we often have “bubble” effects in such markets, however, shows the problem of such markets. In markets such as crypto-currencies where their value is simply assumed and does not arise from somewhere, this phenomenon is exacerbated.<\/p>\n\n\n\n

A huge amount of wealth looking for investment<\/strong><\/p>\n\n\n\n

At the same time there is an enormous amount of wealth worldwide in various forms looking for placements. Global wealth has been estimated to reach $1540 trillion in 2020, of which only $520 trillion is in non-financial assets. The rest of the wealth, over $1000 trillion, was financial assets in the hands of either financial institutions, households, governments and non-financial corporations.<\/p>\n\n\n\n

Much of this wealth seeks investment. Except that in most cases he is looking for much more immediate and great performance. The constant pursuit of high returns also explains why the financial sphere is preferred over the real economy, since there the real investment, the purchase of equipment or the construction of a new plant, or the production of a new line of products often does not have the same return.<\/p>\n\n\n\n

This constantly creates pressure to search for “markets” where investments will have impressive returns. Cryptocurrencies are one such example.<\/p>\n\n\n

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But, at the same time, we should not forget that in addition to the investments in cryptocurrencies themselves, there are also the companies that trade them, the platforms that facilitate these transactions, such as FTX.<\/p>\n\n\n\n

The problem is that even “prudent” investors, for example those who do not invest directly in cryptocurrencies because they consider them to be a risky investment, have no problem investing in companies that trade in cryptocurrencies. That is, while cryptocurrencies are treated as a very risky and not at all guaranteed investment, the companies that manage them are treated as promising start-ups.<\/p>\n\n\n\n

This meant that while Bankman-Freid had built a financial empire on a supposedly high-risk type of business, at the same time they could market their company as a highly successful new company in which those investors could invest. which usually avoid high risk positions.<\/p>\n\n\n\n

The result was in a company that at the core of its activity had assets without any real value, large groups such as the Ontario Teachers’ Pension Plan or funds such as Tiger Global, Sequoia Capital rushed to invest.<\/p>\n\n\n\n

Today the image is dominant<\/strong><\/p>\n\n\n\n

At the same time, of course, things were not going particularly well with the management of the company itself. In fact, it seems that the company was indulging in one of the basic “sins” of a business, namely transferring resources from one side of the group to the other and not being fully aware of what situation it was in.<\/p>\n\n\n\n

The collapse of the $40 billion Luna cryptocurrency a few months ago affected the entire industry, and various forms of bankruptcies followed, mainly because of the way companies involved in this industry keep promising huge returns, based on coins that don’t deliver. they have real value, they lend money to their customers, while when things go bad they cannot easily handle the mass withdrawal of customers, who usually rush to liquidate in bulk what they have.<\/p>\n\n\n\n

In addition, it appears that FTX and Bankman-Freud, as well as the other executives (almost all under the age of thirty) engaged in all manner of squandering the abundant cash flowing into the business.<\/p>\n\n\n

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At the same time, however, it seems that now even supposedly “serious” investors do not proceed with the necessary checks and are largely “seduced” by the image that these companies exude.<\/p>\n\n\n\n

Bankman-Freud the image of youthful genius-the “Midas touch”<\/strong><\/p>\n\n\n\n

Let’s not forget that among all the rest Bankmann-Freud exuded the image of youthful genius with the “Midas touch.” An image that has haunted the world of capital markets, because no one ever wants to be accused of missing out on an opportunity to invest in the next “big thing” because the person who came up with the proposal seemed too young and poorly dressed. Of course, let us note here that at the same time Bankmann-Freud also enjoyed the advantages of a well-connected family.<\/p>\n\n\n\n

But at the same time little importance was given to exactly where all this technological prowess was embodied and to what extent it could actually manage such great wealth. The evidence that has come to light shows the behavior of grown children who simply have a lot of money and want to spend it. The company gave 130 million to add its initials to the name of the stadium of the Miami Eagles and 300 million for luxury real estate in the Bahamas.<\/p>\n\n\n\n

\u03a4he ‘bursting’ of yet another ‘bubble’<\/strong><\/p>\n\n\n\n

This debate constantly comes back to the fore whenever there is the “bursting” of yet another “bubble”, either at the corporate level or at the industry level. And then it is forgotten in the frantic search for every sign that the “markets are doing well”, every index that points upwards, every balance sheet that looks profitable, so that an ultimately vicious cycle can continue.<\/p>\n","protected":false},"excerpt":{"rendered":"

We have become accustomed to considering financial success anything that appears to have large revenues and profits, ignoring what exactly is happening, where those…<\/p>\n","protected":false},"author":1,"featured_media":11392,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,961],"tags":[2145,2408,3326,3917,1049,3918],"class_list":["post-11391","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economic","category-financial-economics","tag-bankruptcy","tag-business-bankruptcy","tag-cryptocurrencies","tag-ftx","tag-investments","tag-markets"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/11391","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11391"}],"version-history":[{"count":1,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/11391\/revisions"}],"predecessor-version":[{"id":11396,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/11391\/revisions\/11396"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/media\/11392"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11391"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11391"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11391"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}