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Sam Bankman-Fried's FTX is not the Lehman Brothers of crypto: Morning Brief

Jared Blikre
·4 min read

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Thursday, November 10, 2022

Today's newsletter is by Jared Blikre, a reporter focused on the markets on Yahoo Finance. Follow him on Twitter @SPYJared. Read this and more market news on the go with Yahoo Finance App.

Cryptocurrency crashed on Wednesday, with most coins and tokens plummeting to multi-year lows. Bitcoin has lost one quarter of its value this week alone as major crypto exchange FTX halted customer withdrawals and lost a potential buyout bid Wednesday from rival firm Binance.

Until a few days ago, FTX CEO Sam Bankman-Fried was considered an industry leader and a lender of last resort. The media compared him to the Federal Reserve, Warren Buffett and J. P. Morgan. Now, potential lenders are backing away from FTX's toxic balance sheet. Bankman-Fried, just 30 years old, has lost most of his billions of dollars in wealth.

In nixing the buyout, Binance cited "mishandled customer funds" and "US agency investigations."

The possible downfall of FTX is a defining moment for cryptocurrency. Some observers are even comparing the FTX to Lehman Brothers, whose collapse served as one catalyst for the 2008 financial crisis. But Wall Street professionals stress that FTX doesn't imperil the global financial system the way Lehman did.

Yes, the fallout could trigger more large-scale failures in the cryptocurrency world. Cryptocurrency could tumble further after the market cap for the entire sector fell below $1 trillion on Wednesday. Regulators and politicians could seize the moment to warn of crypto's risks.

But ultimately, cryptocurrency is here to stay. Some in the industry would argue that cryptocurrency companies will benefit as investors continue backing away from FTX.

"It's important to separate the FTX news from the crash in crypto. Generally speaking, business failures tend to be constructive and productive for the remaining players in the market," Keith Bliss, Global Head of Markets Strategy at cryptocurrency brokerage and exchange firm BloxCross, told Yahoo Finance.

Rather than the Global Financial Crisis, Bliss compares the current episode to the dot-com bubble of the late 1990s and its subsequent failure.

"I was working with my [current BloxCross] business partner, Diego Baez, at Knight Securities in the late 1990s when it was not uncommon to see 10 to 15 IPOs come to market any given day," says Bliss.

Back then, Web1 was being built and deployed along with its attendant architecture that would pave the wave for Web2 and Web3. When the bubble burst, many firms folded — seemingly overnight. In their wake rose the mega cap giants we know today. Many tech giants are enduring their own stock price crashes, but they're still on relatively firm financial footing.

While Sam Bankman-Fried might have lost his luster, future crytpo leaders will soon emerge. In the meantime, nobody knows the ultimate fate of FTX.

We reached out to FTX for comment and will update the post if the company responds.

What to Watch Today

Economy

  • 8:30 a.m. ET: Consumer Price Index, month-over-month, October (0.6% expected, 0.4% during prior month)

  • 8:30 a.m. ET: CPI excluding Food and Energy, month-over-month, October (0.5% expected, 0.6% during prior month)

  • 8:30 a.m. ET: Consumer Price Index, year-over-year, October (7.9% expected, 8.2% during prior month)

  • 8:30 a.m. ET: CPI excluding Food and Energy, year-over-year, October (6.5% expected, 6.6% during prior month)

  • 8:30 a.m. ET: CPI Index NSA, October (298.488 expected, 296.808 during prior month)

  • 8:30 a.m. ET: CPI Core Index SA, October (300.094 expected, 298.660 during prior month)

  • 8:30 a.m. ET: Real Average Hourly Earnings, year-over-year, October (-3.0% during prior month)

  • 8:30 a.m. ET: Real Average Weekly Earnings, year-over-year, October (-3.8% during prior month)

  • 8:30 a.m. ET: Initial Jobless Claims, week ended Nov. 5 (220,000 expected, 217,000 during prior week)

  • 8:30 a.m. ET: Continuing Claims, week ended Oct. 29 (1.487 million expected, 1.485 during prior week)

  • 2:00 p.m. ET: Monthly Budget Statement, October (-$90.0 billion expected, -$429.7 billion during prior month)

Earnings

  • AstraZeneca (AZN), Brookfield Asset Management (BAM), Compass (COMP), Dillard’s (DDS), Honest Company (HNST), LegalZoom.com (LZ), Nio (NIO), Poshmark (POSH), Ralph Lauren (RL), Six Flags (SIX), Tapestry (TPR), Toast (TOST), Utz Brands (UTZ), Warby Parker (WRBY), WeWork (WE)

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