There is no better teacher in the world than experience. You can tell a kid hundreds of times for years "don't touch the hot stove", but all those warnings and all those years pale in comparison to the millisecond of him actually doing it, searing his hand and searing the lesson in his mind forever. He won't touch another bright red oven burner for the rest of his life. And you can hear "not your keys, not your coins" until the cows come home, but nothing drives home the point more than waking up and finding out that your funds are "frozen" on an exchange.
I am, of course, talking about the FTX collapse and subsequent fall out. I didn't have anything on FTX, but I had a nice chunk on BlockFi. "Had" being the operative word there. Embarrassingly, I didn't even realize BlockFi was tied into FTX until it was too late. BlockFi "paused" withdrawals literally a couple hours after I made my last blog post and only told people with one email late Friday night. Waking up that Saturday was like a fever dream.
Luckily I didn't have everything on BlockFi. Not even half of everything. I guess I intuitively knew not to put all my eggs into one basket, but I certainly had a good chunk on there and now it's all gone. Just an unmitigated disaster of epic proportions.
(One side note and possible saving grace: based on their court appearance and from what they've said recently, I think there's at least somewhat of a chance that BlockFi customers will get back the crypto that was in their Wallets as opposed to what was in the Interest bearing accounts. If you don't know, BlockFi sort of advertised themselves as a crypto savings account and offered 7+% interest on crypto and stablecoins. Then they were taken to court in New Jersey and the ruling was that they could no longer offer interest bearing accounts in the U.S., but anyone who had one could keep theirs and keep earning but couldn't deposit anymore into it. So I, like many others I assume, just figured I'd keep my interest account going there forever and anything else I bought on there just went into my Wallet. So if I do end up getting the Wallet balance back I would consider that a MAJOR win. But I'm absolutely not counting on it).
First off, this will 100% never happen to me again. I bought my own cold wallet and transferred everything I had on other exchanges onto it. New Rule number 1: NO CRYPTO ON EXCHANGES, EVER. Anything I buy now I move to my cold wallet immediately, save for a couple hundred in each crypto to sell/trade. Absolutely no exchange is safe, period. They never were. And while this is unquestionably horrible and embarrassing beyond belief, it doesn't make me "mad" at bitcoin whatsoever. If anything it strengthens the case for (self-custodial) BTC. This kind of thing can happen anytime and on any exchange, and not just to crypto. Wealth has been confiscated by the State in every country since the dawn of wealth. Even in America less than 100 years ago, the government made it illegal to own gold under the penalty of jail time. So if you own crypto, you simply MUST purchase a cold wallet. They're not as hard to set up and use as you might think. {Pro tip: I recommend the Nano Ledger type S that DOESN'T have bluetooth. And when you buy one, buy it directly from Ledger, not on Amazon or any other third party site. There are thousands of youtube videos showing how to set it up and use it. I recommend "the crypto dad" on youtube for his Ledger unboxing/walkthrough video.}
And while this doesn't deter me or my outlook on crypto in the future, I can't lie and pretend this isn't embarrassing and borderline devastating. I mean, I fully knew and understood the "not your keys" mantra and why keeping BTC on an exchange literally nearly defeats the entire purpose of crypto. It's not like I'm some guys uncle who just plopped down 5k on an exchange and left it there. I am fully in this space and fully cognizant of the risks. And I still got burned. I just truly could not envision a scenario where BlockFi would simply default on 100% of its customer funds overnight. Like, what?? But here we are.
The second worst thing about all this is that the warning signs were there. I still remember the day I got the email from them offering 7.5% on stablecoins. It didn't seem right to me and I should have pulled out that day. Even worse, BlockFi actually paused withdrawals a few months ago! That was why they were even in bed with FTX in the first place. FTX bailed them out (or not, apparently). The fact that I didn't get out after that happened is kind of mind blowing, even to me. And while BlockFi and FTX are absolute criminal scumbags who I sincerely hope rot in prison (yea like that'll happen), the cold, hard truth is that I deserved this. I can't plead ignorance and the warning signs were all there. It's been tough to really sort of digest this and admit it, but it is the truth. The world is a big place filled with all kinds of people, and it's on you to protect yourself. No one else is going to do it for you, even the people who are paid to. And it's not enough to just "know" this, you have to live by it too.
Now, THE worst thing about all of this is where my money actually went. If they gambled recklessly with customer funds and the money was just lost, that's one thing. It's a horrible and illegal thing, of course, but it's a lot less horrible than where the money actually went in this case. MY money, like my own literal money that I earned, went to some of the absolute worst, scummy cretins on this planet and towards some of the worst causes imaginable. Top Democrat politicians and mega donors. Corrupt regulators and Bankers. Money printers. Fucking "UKRAINE". It'll probably go towards anti-crypto regulation. Picturing my money being spent on some corrupt Ukrainian arms dealers' hotel stay for the week, or in the pockets of Maxine Waters or Katie Hobbs. Like, some of the worst people who exist with power, all working towards some of the worst policies this country has ever seen. Things I'm diametrically opposed to and which got me into crypto in the first place. They have some of my money and are using it to advance some of the most damaging ideas we've ever seen. It's so absurd it's practically vulgar. It's so ironic that it's borderline funny to be honest.
It really does make me sad though, not just for myself personally, but for bitcoin in general. This kind of stuff, the money printing, the buying of elections, the corruption, the bail outs, the ongoing war in Europe that we're sponsoring for some reason. It's all the kind of stuff that helped create the hard and sound money rules of BTC, with its capped supply and heavy duty security. And BILLIONS of dollars in crypto just got stolen to fund all of it. This is indeed a very dark time for the crypto space. Something we'll probably remember forever.
A couple more things on FTX before we move on. The details about this SBF guy and his whole operation are astounding. And I don't mean that lightly. I mean literally read about this whole thing and you will be astounded. He bragged about playing video games while being on huge business calls moving millions of dollars. His little weirdo girlfriend who he put in charge of their trading arm DIDN'T KNOW WHAT A STOP LOSS WAS. She bragged publicly about doing amphetamines. There was a group of about a dozen or so of them and they all lived together and were openly fucking each other in their little "polycule" or whatever the fuck they called it in the Bahamas. FTX didn't have a compliance board! Oh and ready for this? Their chief regulatory officer, Dan Friedberg (sorry but of course that's his last name) was one of the major players in the Ultimate Bet 20 million dollar scandal! You couldn't make that up if you tried. Was ANYONE looking at these guys, at all? (If you don't know, Ultimate Bet was an online poker site back in the day that very famously stole customer funds. One of the owners of the site and some of his minions hacked into the site and were playing while being able to see their opponents cards. They made off with at least 20 million. At least they were all caught though, and had to pay it back plus went to jail. Just kidding! They didn't even GET CHARGED never mind make restitution, and this Friedberg guy wasn't even disbarred from being a lawyer. It's almost enough to make you want to do something drastic, isn't it?)
Before I really lose my mind, one silver lining here is that this could have happened 5 years from now and it would have been much, much worse. Clearly this was going to happen at some point and imagine if this all went down years down the line when these exchanges built up even more trust and people had even more money on them. Imagine if bitcoin was worth 80k. If it had to happen, which it did, it's better that it happened now during a bear market. It's painful but I can rebuild from here.
So what can we learn from this? Besides the obvious "not your keys, not your coins", I think one lesson is that as a society and as investors, we need to stop giving these little weirdo "wunderkind" children so much respect. New isn't always better. Not being able to look people in the eyes is not an admirable trait. Wearing pajamas and playing league of legends in business meetings does not make one a genius. In the age of billion dollar IPO's and the Mark Zuckerbergs of the world, I think it's clear that everyone got a little too loose. Well, not a little too loose, actually. This is 'sleeve of wizard' loose. It's a bad look for not only the crypto industry, but just our society in general. We're easily bamboozled. And this guy SBF's veneer of "effective altruism" was like the icing on the cake. "How can he be bad, his hair is weird and he's committed to giving other people's money to Democrats!" Beware the addy-d out wolf in sheep's pajamas, I suppose.
I'm a little all over the place here and I'll probably have more to say about this as it all unfolds. If you're out there and you got burned like me, don't let it chase you from the space. That's whey they want. I know in my little circle, people are capitulating. People are just done with it all and I can't say I blame them. But this is the worst time to give in. Like the saying goes, 'be fearful when others are greedy and greedy when others are fearful.' If you have your principles, stick with them. Don't let SBF and his little alien looking fuck buddy win. Take a break if you need to, sure, but don't give up. Bitcoin is the future. The road will be rocky and there will be more set backs, but stick with it.
Personally, I am taking a little breather. I've probably been a little bit too into it all, making too many trades, buying every single dip. I sold off a chunk of my ETH as I think the btc/eth valuation is going to come way down. My plan from here on out is to just keep slowly buying BTC, keep it in my wallet, and when the btc/eth valuation comes back to earth, buy up more ETH with BTC. I'll update my new positions next post. I have the BlockFi mess just labeled as a huge sell with a nice fat zero for dollars received. So now I'm way upside down with all my buys being higher than my sells. My poor sheet is hard to look at now. My avg BTC price went from 22k to something like 40k now and ETH is even worse. But like I said, I'm not going anywhere, and maybe someday we'll all laugh about that time that little weirdo who almost brought it all down.
Check back soon, see ya!
