The annualized inflation rate of Ether dropped to 0.029%, reducing its net issuance and resulting in more coins being burned than minted. In contrast, FTX’s insolvency caused price volatility, leading to tighter regulation and a bankruptcy filing. Regulators are using the opportunity to impose new rules, with California’s department of financial protection investigating the failure of FTX. A bill pushed forward would allow the Commodity Futures Trading Commission more power over crypto markets, whilst Coinbase’s Brian Armstrong supports more regulation. FTX’s collapse was due to infighting, lack of oversight, and nepotism, and SBF has resigned as CEO.
The Good News: Price Volatility is Benefitting ETH
Following the London hardfork in 2021 and the Merge, there has been talk of deflationary ETH. However, the recent price volatility caused by FTX’s insolvency has had a silver lining. The annualized inflation rate of the Ether token has dropped to 0.029%, resulting in more coins being burned than minted. In fact, over 5,000 ETH were burned in a single day, the highest number since June.
This reduction in net issuance has reduced the supply of ETH, and over 13,000 ETH have been removed from the supply in the past three days. This news is great for Ethereum, proving it to be a reliable investment.
The Bad News: Regulators are Circling Crypto’s “Bloody Waters”
Unfortunately, FTX filing for bankruptcy and regulators investigating the apparent failure of the company has fed into the need for tighter cryptocurrency regulations. Regulators and lawmakers are taking the opportunity to examine crypto under a microscope and impose new rules, causing concern for some.
The bill, which SBF was a major proponent of, would give the Commodity Futures Trading Commission more power over crypto markets and encourage the development of a regulatory framework to increase consumer confidence. However, giving too much power to regulators new to crypto could result in a catastrophe.
FTX: The Crypto Incarnation of Fyre Festival?
FTX’s downfall has been compared to the Fyre Festival disaster. At its peak, FTX looked like a promising company, with even Tom Brady and Larry David endorsing it. However, it turned out that the whole operation was held up by matchsticks, and FTX was just a bunch of friends living in a luxury penthouse in the Bahamas.
The company’s inner circle consisted of former co-workers and people SBF met at MIT. Under pressure, employees revealed that issues with infighting, lack of oversight, and nepotism led to the company’s insolvency. This morning, FTX filed for Chapter 11 and resigned SBF as CEO.
In summary, the current state of crypto is mixed. While Ethereum is benefitting from price volatility, increased regulation and investigations into companies like FTX are causing concern. It’s important to tread lightly when dealing with regulators new to the crypto industry and thoroughly research any potential investments before committing.