It was like a train wreck: sudden, devastating, and difficult to look away from. In early November, cryptocurrency mogul Sam Bankman-Fried lost nearly all of his $16 billion fortune practically overnight as his crypto exchange, FTX, descended into bankruptcy due to broken deals and consumers withdrawing. The fallout brings seemingly endless questions: what happened exactly? What does this alleged corruption say about Bankman-Fried? Where will cryptocurrency go from here?

Cryptocurrency is complicated, but here are the basics: crypto is digital currency. It exists entirely online, and it’s not supposed to be dependent on traditional currency, like dollars, pounds, or euros. It’s not regulated by banks, but rather, all transactions are noted down on a public ledger known as the blockchain. Crypto is created with a process called mining, which cybersecurity provider Kaspersky describes as “using computer power to solve complicated mathematical problems that generate coins”, and it’s traded largely on cryptocurrency exchanges.

New York Magazine describes a crypto exchange as, “…a website where users can buy and sell digital currencies. Another thing an exchange can do is create its own cryptocurrency, which is like printing money out of thin air.” FTX has its own ‘token’ or type of cryptocurrency, called FTT, which they were creating a lot of. Large amounts of this currency went to a struggling hedge fund called Alameda Research, which was owned by Bankman-Fried. It was revealed that he was using FTT like a prop-up for Alameda Research’s dying body, making the fund look alive. 

When crypto-focused site CoinDesk broke the news, other exchanges sold all of their FTT, making FTX descend into crisis. People who traded on FTX panicked, but when they tried to withdraw their crypto from the exchange, there was not enough crypto to give out. Bankman-Fried had put it all into Alameda. 

“No financial institution has their customers’ money in a lockbox,” Semafor business and finance editor Liz Hoffman said on podcast Today, Explained, likening the FTX collapse to the Stock Market Crash of 1929. “That’s not how it works. They lend it out. They invest in things. But there’s all these rules that try to keep them on the rails. They’re supposed to have a certain amount on hand that if you showed up at the bank tomorrow and said, ‘I’d like my deposits back,’ they will give it to you. If they couldn’t, that would spark a massive panic.” 

Due to FTX’s fallout, a million creditors could have lost their money, according to Today Explained. And Bankman-Fried, valued at $16 billion dollars at the beginning of November, has also lost nearly all of his wealth. 

Bankman-Fried was a unique character in a world of bizarre billionaires — a young proponent of effective altruism and a vocal donor of candidates across the political spectrum, he even called for regulations on crypto, a stance unheard of amongst crypto investors. 

But now? Bankman-Fried is erratic. He has dismissed his advocation for regulations and previous moral assertions as “just PR” in a Vox interview. In that same conversation, he denied that FTX invested with creditor’s money in Alameda, said that declaring bankruptcy was a mistake (he has since stepped down as CEO of FTX), and has decided that his main concern is raising funds for the crypto exchange he has left. He does not seem like a pragmatic altruist, a confident mogul, or a refreshing proponent of ethics in the tech industry. He seems like another bizarre billionaire. 

Here is the truth: crypto is currently on the decline. Millions have lost money. Liz Hoffman said that the industry is entering a “crypto ice age”. NFTs, or pieces of art that are bought with crypto, have tanked: Justin Bieber’s ‘Bored Apes’ NFT was worth $1.3 million at the beginning of the year, but it is now worth less than 10% of that. Ethereum, a prominent crypto token, has fallen over 70% in value this year. Bitcoin, the darling of the crypto world? Down 66% since January. “To the moon!” crypto bros cry. But their precious investments are, instead, heading six feet under, and the FTX collapse is only the latest indication of that. 

It can be argued that the whole world is having a bit of an economic crisis, so of course crypto is down. But, as SmartAsset says, “Cryptocurrency is not currency, which means it doesn’t respond to inflationary pressures like a foreign currency would.” Traditional currencies are susceptible to inflation. And while the situation is fairly complex, crypto, which is valued for how it’s not like traditional currencies, should not be impacted in the same way. It is in a grave of its own design. 

On top of all of this, the very nature of crypto has negative impacts. The process in which the currency is generated, ‘mining’, is harmful for the environment — Earthjustice reports that the cryptocurrency industry was responsible for more carbon emissions than the largest coal plant in the U.S. in 2021. Additionally, its lack of regulation is beneficial for hate groups — because crypto exists only online, it’s difficult to track, so white supremacists are known to use crypto. 

“It’s grown harder to use the legal system to stamp out hate groups because now they operate with online networks and virtual money,” lawyer Beth Littreall said to AP News. “We were able to sue the Ku Klux Klan, a terrorist organization, in essence out of existence. Doing the same today is much harder. The law is evolving but lagging behind the harm.” In short, cryptocurrency is descending into crisis, is precarious by nature, and bad for the social and economic environment. While crypto may seem like a trendy, attractive investment, the aesthetic is only a facade the corporations behind the smoke-and-mirrors money want buyers to think. After the FTX crash, however, faith in crypto is declining, so don’t get caught up in the propaganda; become educated. Don’t be like Sam Bankman-Fried — as crypto continues, call for it to be regulated, really and truly, full of conviction. Let calls for altruism be truly effective.