FTX Collapse Has Fans Rethinking Investing in Cryptocurrency

The demise of FTX has some one-time proponents rethinking investing in cryptocurrency.

To be clear, it’s not just the collapse of FTX and the resulting federal investigation that has turned off crypto fans, the Wall Street Journal reported Sunday (Dec. 18).

But that company’s multi-billion-dollar implosion does follow a year that saw the crypto market suffer an ongoing downturn, and investors pull nearly $20 billion from crypto asset funds last month, the report said.

Among the disappointed investors is Dennis Drent, who began investing in crypto last year after seeing a bitcoin proponent speaking to FOX News’ Tucker Carlson.

“He had me convinced that you can’t lose,” said Drent, who told the WSJ he invested around $25,000 in Grayscale Bitcoin Trust.

However, when crypto markets began to drop, Drent decided to cash out, taking a 50% loss in the process.

Another investor, 28-year-old Houston finance worker Stephen Jones, said he began investing in crypto in college. He later became a bit skeptical and decided to cash out just before the collapse of FTX.

FTX “definitely opened my eyes a little bit,” said Jones. “I’m not really seeing as much value-added activity as was initially promised.”

As PYMNTS noted last week, FTX’s failure has highlighted the debate between crypto proponents and crypto critics, which was on display in Washington D.C. as the U.S. Senate dug deeper in the issue.

Among the skeptics was actor-turned-writer Ben McKenzie Schenkkan, who is set to publish a book on the industry “Easy Money” next year.

He compared FTX’s collapse to the Bernie Madoff scandal, which came to light 14 years ago this month, noting that Madoff defrauded, “37,000 clients, FTX has 32 times that amount in the U.S. alone.”

He followed up by calling the entire crypto industry one “giant Ponzi scheme, where you are either a scammer or a mark. And if you don’t know which you are, you have a problem.”

In response, crypto defender Jennifer Schulp of the Cato Institute tried to clarify that “the issues with FTX do not appear to be intrinsically tied to cryptocurrencies or other blockchain technologies,” and urged lawmakers to differentiate “decentralized projects from centralized exchanges.”

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