[Panel Recap] Does the FTX Collapse Affect Crypto PH?

• The collapse of FTX has caused a loss of trust in the cryptocurrency industry and has been compared to the Lehman Brothers moment in 2008, according to Beryl Li, co-founder of Yield Guild Games.
• Colin Goltra, COO of YGG, believes the exchange’s downfall was a natural result of market forces, and that the industry follows a four-year cycle of blow-ups.
• Ramon Tayag, co-founder of BloomX, agreed with Goltra’s assessment but also emphasized the importance of learning from the FTX collapse and evaluating risks more carefully in the future.

“In crypto, we actually have real platforms, we actually have real games (that are) actually being built right now, and there (are) actually fundamentals behind them. And so despite the contagion, people within the industry who are real builders are really positive because of the innovation right now.”

This is the statement of Beryl Li, co-founder of Yield Guild Games (YGG), who, together with Colin Goltra, YGG’s chief operating officer (COO), and Ramon Tayag, co-founder of BloomX, participated in a panel discussion at the Philippine Web3 Festival, moderated by Michael Mislos, the Editor-in-Chief of BitPinas. The discussion focused on the impact of the FTX collapse on the web3 industry in the Philippines.

According to Li, one of the ripple effects of the downfall of FTX is the loss of trust, even comparing it to a financial crisis. 

“There’s a loss of trust within the industry. It’s actually the same thing with the financial crisis, right? We’ve just had a Lehman Brothers moment where people have actually lost trust; they don’t know whom to actually rely on these days. There are a lot of bankruptcies, which are like withdrawals from various exchanges like (what is) happening now. So I think it’s one of the challenges to date.”

The YGG co-founder is discussing the concept of the “Lehman Moment,” where the failure of a single entity can have far-reaching consequences and become a problem for the entire industry. This term originated after the 2008 bankruptcy of Lehman Brothers, which initially affected investment banks in the United States, but eventually became a global issue.

On the other hand, Goltra insisted that the exchange’s collapse just really made a point about natural market forces: 

“I still believe that this situation is downstream of the Luna blow up and it’s a little bit of a folk belief for people that have been in the industry for a long time. But we are weirdly on these four-year cycles, loosely based on the not that loosely. But like there is a high correlation with kind of the Bitcoin halvening cycle and just there are blow-ups and there’s this four-year cycle.”

This is where Tayag agreed to this idea, but the BloomX co-founder also highlighted that lessons from this downfall should be learned, as “this is not the first (and) it’s not going to be the last. So, hopefully, people learn from this lesson and evaluate the risks some more in the future.”

The Role of CZ in the FTX Downfall

Meanwhile, when Mislos asked if the tweet of Binance CEO Changpheng “CZ” Zhao played a significant role in calling out Sam Bankman-Fried (SBF), FTX’s CEO at that time, Li emphasized that CZ has the right because there was strong evidence against SBF: 

“So I’m a really big proponent of freedom of speech, right? And personally, I don’t mind CZ calling out SBF, for example, for as long as there is evidence—and the evidence was strong. So I’d rather it blow up today than blow up later because the consequences will be more severe if we actually find this out, like when they have like deposits of more than like $20 billion already, right?”

The YGG co-founder also stressed that CZ, being transparent at the time, exemplifies the importance of blockchain technology—transparency. Because “with blockchain technology and crypto, we’re actually able to provide the evidence that we need to be able to really, like call out people, for instance.”

Tayag then shared his experience where some people who came into a Bitcoin meet-up that he hosted asked him if it was really CZ’s fault. 

According to the BloomX chief, he immediately answered: “Well, you know, with all these blow-ups, there’s always some catalyst. Would you say it’s that catalyst’s fault, like they’ve been running their business apparently we all learn a certain way that made it more vulnerable to price movements in their token, right? And that’s what ultimately brought them down.”

Will the FTX Debacle Drive Filipinos to Move into Decentralized Finance? 

Goltra admitted that though he is hoping for this to happen, there will still be people who will still choose centralized exchanges over decentralized finance:

“Certainly, I think a lot of people are learning a very expensive lesson here, and if, to the extent that a centralized exchange is a middle ground between full DeFi and not using crypto, I think there’s gonna be people going in both directions. So on the one hand, it’s gonna drive some factor of adoption to DeFi, but I do think there’s going to be also a large faction that just sits out the next crypto cycle and probably buys the top of the next market in like four years. So you know, I think it will drive some DeFi adoption, but I think people will also take the opposite lesson as well.”

However, Tayag insisted that, though he believes that the debacle will move people into DeFi, investors who lost money must first recoup their losses and get over it. This is where he highlighted the role of DYOR (Do your own research) first before entering the DeFi industry:

“I certainly hope that as people do their research, they don’t also think that everything available in crypto land is worth getting into, right? Like, you gotta know, just like for people who put their funds in centralized institutions, what kind of risk you’re thinking of when you use a smart contract? What stablecoin is it based on? And if it mostly relies on a stablecoin and that issuer blows up? You know, these are the scenarios that are very important to play in your head.”

The BloomX co-founder also shared that one of the things that he learned from investors in the traditional finance industry, is that investors who know how to manage their money, are “the ones that do well they’re the ones that did not blow up, they just they survived, right., they survived their 30-year, 40-year career in this space and so. Evaluating that risk is very important to do this well.”

Panel’s Conclusion

“Sorry to see it happened. It’s brutal. Reach out, talk to people like this too shall pass. If you stick with it over many cycles, that’s how the wealth gets built. I think, you kind of, have to learn those lessons. You have to really take those like injuries in the market one once or twice before you really learn it and then you learn. Sort of these long-term time horizons that you know, help you get through it,” Goltra advised. 

Li also highlighted that failing is part of succeeding, as lessons can be learned through this: 

“Markets are cyclical, right? And during the bear market, it’s always the best time to build. And in the Philippines, we’re known as really great creatives and builders. So just keep building if you don’t have any exposure to the entire FTX debacle; just focus and build.”

Timeline of the FTX collapse covered by BitPinas:

• Binance CEO Changpeng Zhao (CZ) announced that it is set to liquidate its own FTX Tokens ($FTT) after a Coindesk article revealed that Alameda, FTX’s sister company, rests largely on FTT and not on any independent asset. [Read: Just House Cleaning: Binance To Liquidate Own FTX Tokens]
• CZ revealed that his company has signed a “letter of intent” to acquire FTX Exchange. [Read: BREAKING: Binance Signs Deal to Acquire FTX Exchange]
• FTT went into freefall and lost most of its value (about 80%) [Read: FTX Token Price Drops 80% as News of Binance Buying FTX Surface]
• CZ denied that there is any kind of “conspiracy” against FTX, or that he’s in a “fight” with its CEO Sam Bankman-Fried. [Read: Binance CEO Denies FTX Conspiracy]
• Binance backed out of its deal to purchase FTX because “the issues are beyond our control or ability to help.”[Read: Binance Will No Longer Acquire FTX]
• BlockFi files for Chapter 11 bankruptcy, weeks after the collapse of FTX, which previously signed a term sheet to provide credit to the embattled crypto lender last June. [Read: What Happened? BlockFi Files for Bankruptcy Amid FTX Crypto Contagion]
• The Bangko Sentral ng Pilipinas (BSP) has confirmed that it has asked locally licensed cryptocurrency exchanges about their exposure to FTX’s downfall, exchanges then clarified that none was affected by the downfall. [Read: Report: BSP Asks Local VASPs of FTX Exposure, Exchanges Respond]
• SBF has been arrested by Bahamian authorities in relation to the collapse of his founded exchange, a CNBC report revealed. [Read: BREAKING: FTX Founder Sam Bankman-Fried Arrested]
• After his arrest, he was charged by the U.S. Attorney’s Office and the US SEC for wire fraud, conspiracy to commit money laundering, and campaign finance violations. [Read: Days After SBF’s Arrest, What Happened Next?]
• SBF has been extradited to the US to face fraud charges in New York but has been released on $250 million bail, secured by the equity in his parents’ home. However, Caroline Ellison, former CEO of Alameda Research, and FTX co-founder Gary Wang have both pleaded guilty to charges related to FTX’s collapse, including manipulation of the price of the exchange’s token, FTT. [Read: FTX Update: SBF Extradited and Released on Bail, Ellison and Wang Plead Guilty]

This article is published on BitPinas: [Panel Recap] Does the FTX Collapse Affect Crypto PH?

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