Author: Filippo Iachello

FTX founder Sam Bankman-Fried was arrested last night in the Bahamas. What happened? What will be the next developments?

FTX founder Sam Bankman-Fried was arrested on the morning of the 13th of December (at 5:00 a.m. GMT) in the Bahamas, at his residence in Nassau. Local police forces detained him one day before his testimony before Congress that was scheduled for Wednesday the 14th December 2022. It is now likely to be canceled. But why was SBF arrested today specifically, after weeks of being left free?

There are two main hypotheses. For some, the arrest comes with the fear that Bankman-Fried might move to a country where the US could not extradite him. Others speculate a connection with new allegations made by Do Kwon that were picked up by the media. They concern a possible involvement in the collapse of the Terra (LUNA) ecosystem.

According to the New York Times, there are five charges for the founder of FTX: wire fraud, conspiracy to commit wire fraud, securities fraud, conspiracy to commit securities fraud, and money laundering. What will be the next developments? Will Sam Bankman-Fried’s collaborators Caroline Ellison and Sam Trabucco also be arrested soon? Are SBF and Alameda Research really responsible for the collapse of the Terra-LUNA ecosystem?

What will happen now to Sam Bankman-Fried and his co-workers?

After being ‘at large’ for quite a long time (it has been about a month since the FTX exchange declared bankruptcy on the 11th November 2022), as of yesterday morning, Sam Bankman-Fried is being held in custody in a Bahamian prison. The FTX founder’s arrest came at the request of the US government, which plans to extradite him to a US federal prison.

Commenting on the incident, the Bahamas Prime Minister Philip Davis said: ‘The Bahamas and the United States have a common interest in holding accountable all individuals associated with the FTX failure who may have betrayed the public trust and broken the law.

In these first hours after the arrest, uncertainty reigns. It is not yet clear how many years in prison SBF faces, just as it is not yet known whether he will testify before the US Congress tomorrow as scheduled, although this seems unlikely.

Another question on the minds of many concerns the future of Sam Bankman-Fried’s associates, Caroline Ellison and Sam Trabucco. For the two, respectively CEO and co-CEO of investment fund and market maker Alameda Research, the same fate is probably in store. In the meantime, statements by the FTX founder are circulating again. A few days ago in an interview, he said was sure that he could not be arrested. On that same occasion, he had revealed his commitment to working on a new project with the aim of returning the money lost to his users.

Was it SBF and Alameda that brought down Terra (LUNA)?

What does Terra (LUNA) have to do with the SBF affair? In recent days, there has been talk about the possible responsibility of Alameda Research in the failure of the ecosystem. Alameda was the trading company founded by Sam Bankman-Fried, that has strong ties to FTX for reasons linked to fund management. A large amount of these funds were allocated to FTT, the token of the FTX exchange.

According to these allegations, Ellison and Trabucco’s hedge fund allegedly attacked Do Kwon‘s blockchain in order to destroy its competitor: Three Arrow Capital (3AC). They were heavily exposed to the blockchain’s two main assets: the LUNA crypto and the UST stablecoin.

The accusation, which originated from former Terraform Labs CEO Do Kwon and Three Arrow Capital co-founder Su Zhu, has not been ignored by US prosecutors. They have launched an investigation that will result in a market manipulation charge against Bankman-Fried and Alameda Research. Should evidence be found of Do Kwon’s and Sun Zhu’s allegations, the charge of market manipulation could be added to SBF. This would aggravate the legal situation of the FTX founder in no small measure.

There is currently no conclusive evidence to support these allegations. The investigation by the US government will shed light on the facts as it takes course. In short, as of today, there are very few certain answers. Many questions about the future and past of the former FTX CEO remain.

The opinion of crypto Twitter

Meanwhile, on crypto Twitter, all hell has broken loose. Thousands of users are rejoicing and making sarcastic comments about the FTX founder’s arrest. Some wonder how many years in prison he will have to serve, and how he will pay for a good lawyer.

In particular, the crypto Twitter users are summoning the extraordinary lawyer Saul Goodman, star of the series ‘Better Call Saul’. He is the only one, according to them, capable of saving the defendant.

Nothing is sparing SBF in the world of crypto Twitter. A series of tweets have also surfaced that bring up his alleged relations with the US Democratic Party.

Bankman-Fried had secretly given donations to Joe Biden’s party during the election campaign of late 2020 and early 2021. These tweets underline the strange timing of this arrest. Perhaps his statement under oath to Congress could have been quite uncomfortable.

In light of recent events, the plot of the movie that Apple plans to produce is also thickening. Now that he has been arrested, will Sam Bankman-Fried be convicted? Is the founder of FTX really involved in the collapse of Terra (LUNA)? And what will happen to Caroline Ellison and Sam Trabucco?

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“Fear Of Missing Out” is one of the most common forms of anxiety of our time. But what does it really mean? Here are some examples from the crypto world

The word FOMO stands for ‘Fear Of Missing Out’. FOMO is the feeling of anxiety that you may experience when you fear that you have missed out on something important. It could be an event, an opportunity or a conversation. With the arrival of social networks, this fear has become more widespead although it has always characterised human behaviour. In other words, FOMO is the constant feeling of being excluded from experiences that everyone else but us is experiencing. The term has also become very popular in the context of trading and cryptocurrencies. In this context, it could involve a fear of missing out on an upward price movement or a potential profit opportunity more generally. In this article, you will find out what FOMO is, its origins and what the term means in the world of crypto! 

What is FOMO? Meaning and origins

The term FOMO was created in 2004 by Patrick J. McGinnis, a Harvard Business School scholar, as part of his research on the social behaviour of first-year university students. From 2010 onwards, psychologists have taken up the concept of FOMO to describe a condition found in individuals who are constant users of social networks. These people, who spend a lot of time observing the lives of others, find themselves obsessively comparing their own experiences with those of others. By constantly comparing themselves, they feel like something is lacking, that they are mistaken or lagging behind in certain aspects of life. Psychologists have described this psychological condition as a constant apprehension that others might have experiences from which the person experiencing FOMO was personally excluded.

Is FOMO just social media anxiety?

The ways in which FOMO manifests itself can be different and vary mainly depending on the intensity of the sensation. You may experience it once in a while during a conversation or more continuously, which may turn this feeling into a real pathology. Suffering from this fear on a continuous basis can cause a worsening of mood, feelings of social inferiority, loneliness and anger.

As we stated before, FOMO became particularly popular after the emergence of social networks. This gave birth to a new culture based on influencers but also everyday friends, who share their dream life online. This can lead people to compare themselves and feel inadequate. Måneskin‘s bass player Victoria De Angelis also spoke about this recently. In an interview with Radio Deejay, she said that she suffers from FOMO, and that she can’t stop going out for fear of missing out on an experience. In fact, the fear of being cut off turns into a schedule full of commitments and hectic days spent chasing experiences. Often without feeling truly satisfied anyway!

You may have just come home from a hard day and you can’t wait to settle down on the couch, but you see all your friends on Instagram getting ready for a concert. If FOMO arrives, your only thought is ‘I can’t stay at home while the most important concert of the year is just a few steps away from me’. You get ready and go out. When the concert is over, the feeling comes back: ‘maybe I could follow my friends to that club and have a drink instead of going to sleep’. In the mildest cases, people in this situation just crawl into bed with some discomfort. For others, the thoughts become obsessive and limiting.

FOMO in the crypto world

In the crypto world and in trading, the meaning of FOMO remains the same. However it applies to missed profit opportunities rather than experiences. People get convinced that they have forever missed the chance to buy the next crypto that will explode. Everyone but themselves is guaranteed stratospheric gains. The venture into the crypto world of a person suffering from crypto FOMO is conditioned by thoughts like “why did I sell at that price?”, “I should have bought more” or “I absolutely cannot miss out this token’s presale”. This psychological condition usually affects those who have recently got interested in the market and who therefore do not have enough experience to know and control their anxiety. These users often buy and sell impulsively for fear of losing a potential profit opportunity.

Those who get caught up in FOMO when approaching the crypto world are engaging in outright fear, and emotions can hinder the pursuit of a rational strategy. Behavioural finance explains how rash actions, triggered by emotional aspects, can negatively affect the achievement of your goals.

Examples of FOMO with cryptocurrencies

To better explain what FOMO is in the context of crypto, we can use some practical examples. The term is for instance particularly appropriate in the case of new crypto launches. These launches always come together with presales that allow those who participate in them to financially support a crypto project before the official launch by purchasing the native cryptocurrencies. One feature of presales is that they have limited access. Only the quickest users to purchase can actually participate in the launch. This aspect generates crypto FOMO in those who want to participate and fear being excluded.

Dogecoin’s bullish movements linked to Elon Musk‘s tweets can also explain crypto FOMO. Every time Musk posts a DOGE-themed tweet, the price of the crypto goes up thanks to so-called FOMO buyers. These people decide to buy DOGE in fear of missing out on the price rise.

The JOMO (Joy of Missing Out)

The opposite psychological phenomenon is JOMO ‘Joy of Missing Out’. JOMO can be defined as the pleasure of enjoying your interests and passions without worrying about the fact that other individuals are pursuing more satisfying activities.

Instead of despairing over untapped crypto opportunities, those who live in the name of crypto JOMO simply disregard them. In fact, the term JOMO is usually used by no-coiners, those who do not hold crypto. While those in the throes of FOMO feel the need to spend hours and hours in front of charts looking for the next opportunity, the JOMO team doesn’t even bother to give it any thought.

Now that you know what FOMO means and how it differs from JOMO, you might ask yourself: which of the two is the best attitude for experiencing the world of crypto? Probably neither, both FOMO and JOMO are extremes. On the one hand we have a tendency to get too emotionally involved, on the other hand we have a tendency to avoid situations completely. Knowing the latest trends and cryptos on the upside, in short ‘being on your toes’ about all the industry news is certainly not a bad thing. So is learning to be more detached like JOMO fans.

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Do you know about the most important bearish phases in history? What does the crypto bear market of 2022 have in common with past ones?

Following Confucius’ maxim ‘study the past if you want to predict the future’, we are here to analyse past bearish phases with the aim of understanding the dynamics of the bear market we are experiencing now.

If you too are wondering: how long will the 2022 crypto bear market last? Will the price of Bitcoin collapse again? Unfortunately there are no certain answers. However, in this article, you can find information that can help you look at the current state of the market in perspective. For example, we can look at the duration of bearish phases, the elements involved or understand what caused them.

1. The American stock market crash of 1929

The New York Stock Exchange crash of 1929 is the first major crash of a contemporary financial market and the first major crisis caused by free markets and financial speculation. Before the crash of ’29, The United States of America was experiencing one of the most prosperous and economically prosperous periods in history, the so-called ‘Roaring Twenties’. The great economic prosperity of the States seemed unstoppable, made possible by victory in World War I as well as liberal economic policies. However, this economic growth suddenly came to a halt, due to the progressive saturation of the market. Factories closed, products remained unsold and companies began to lay off employees. The crisis of the real economy was reflected on the New York stock exchange through the collapse of the stocks held by both the big capitalists of the time as well as the middle class and small bourgeoisie, who suddenly found themselves without savings.

The real crash came on Thursday 24th October, the infamous Black Thursday. That moment started an intense bear market, nicknamed in retrospect: ‘The Great Depression’. The Great Depression triggered a recession that resulted in a 60% drop in world trade and generated 15 million unemployed people. The Dow Jones, the main US stock index, collapsed by 75% of its value in a few months.

2. The ‘dotcom’ bubble

One of the bear markets in history worth mentioning is the one following the ‘dotcom bubble’. The term ‘dotcom bubble‘ is used to describe the phenomenon of unprecedented growth in the share valuations of technology companies, known as ‘dotcoms’, which occurred in the late 1990s. This juncture was characterised by an exponential growth of investments in internet start-ups. It all started with Netscape, the first Internet browser start-up, whose price per share jumped from $28 to $147 in five months. This strong bullish movement brought incredible enthusiasm to the markets, and in particular to the ‘dotcoms’. Alongside Netscape, Yahoo, Amazon and Apple, hundreds of other fledgling companies exploded on the stock exchange.

However, the bubble burst in April 2000, shortly after the all time high (ATH) of the NASDAQ, the stock market index that tracks the prices of the major American technology companies, at 5,048 points. The bubble burst because, in most cases, the dotcoms had no intrinsic value or viable product but were nothing more than aggressive marketing campaigns. This bear market lasted about two years, during which time the NASDAQ index hit 1,111 points, losing more than 75% of its value.

3. The 2008 subprime crisis

The 2008 bear market can be included in the list of major bear markets in history. The economic crisis of 2008 is the one that has most affected our most recent past. Once again, it was the US that started this recession, with the subprime mortgage crisis that erupted at the end of 2006. Subprime mortgages were financial loans granted by major US banks and financial giants, including Chase, JP Morgan and Lehman Brothers to high risk defaulters, i.e. bad debtors. The crisis exploded in September 2008, when the insolvency situation generated by subprime mortgages was combined with a bubble in the housing market. This bubble was the result of accommodative policies by the Federal Reserve (FED), the central bank of the United States. 

The bear market of 2008 did not remain confined to the States but obviously extended to Europe as well. The central banks of the countries found themselves forced to inject huge amounts of money into their economies, through monetary policies of Quantitative Easing, in an attempt to stem the collapse of the global economy. During the 2008 bear market, the S&P 500 (Standard and Poors) stock market index, which tracks the performance of the 500 most capitalised US companies, plummeted 38.5% and the US financial giant Lehman Brothers declared bankruptcy. The bear market of 2008 had a much bigger impact than can be guessed from the charts. The effects of the systemic crisis generated by the bursting of the subprime bubble are still being felt today.

4. The first crypto bear market: the Mt. Gox hack in 2014

The first real crypto bear market arrived in 2014. Sure, Bitcoin existed since 2008, but until 2013, it had no real market. The only way to buy it was through peer-to-peer exchanges, and its use was relegated to Dark Web sites like Silk Road. However, from 2013 onwards, the buying and selling of BTC was building a real market, mainly due to the growth of the then largest crypto exchange in the world, MT Gox. It was responsible for processing the majority of Bitcoin transactions worldwide.

This period was characterised by the emergence of many exchanges and wallets and is nicknamed the ‘Hack Era’. Between March 2012 and October 2013, numerous exchanges including Linode, Biconica and Bit floor were hacked. The first hacks did not affect the price of Bitcoin, which continued to rise undaunted. From $5 in March 2012, the price of BTC reached $1,150 in November 2013.

At this point, however, came the first black swan event in crypto history happened: the Mt. Gox hack, through which 850,000 Bitcoins were stolen. This black swan event kicked off the first real crypto bear market that lasted 391 days. From a price of $1,150 BTC reached $150, losing 73% of its value.

5. Bear market 2018: ICOs

The spirit of the crypto market cycle from 2016 to 2019 can be summed up in one acronym: ICOs. The term is an acronym for Initial Coin Offering, and it is the equivalent of initial public offerings in the cryptocurrency world. They are pre-sales of tokens that allow those who participate in them to financially support a crypto project before it is launched, through the purchase of native crypto.

This way of selling to the public was popularised by Ethereum in July 2014. ICOs have been simultaneously the curse and delight of this crypto cycle. On the one hand, they allowed the Web3 world to grow and many projects to find supporters. On the other hand, they generated a major speculative bubble, comparable in the way it inflated to the dotcom bubble. The proliferation of ICOs and the great enthusiasm for this new market allowed for many fraudulent projects to raise huge amounts of money. Due to the global macroeconomic situation, in particular the restrictive monetary policies including Quantitative Tightening, the ICO bubble burst at the end of 2017. This caused the beginning of the bear market. Quantitative Tightening is an abrupt tightening of a state’s monetary policy that results in an increase in interest rates with the aim of limiting inflation.

Bitcoin’s price collapsed from the $19,100 ATH to the $3,200 level, losing 84% of its value. Ethereum fared even worse, as the value of Vitalik Buterin‘s crypto went from $1,400 to around $150, registering a downward movement of -95%. The bottom, i.e. the lowest point reached by a crypto in this cycle, was reached exactly one year after the ATH was reached, on the 17th of December 2018.

6. The crypto bear market of 2022

The particularities of this market cycle are the influence of the COVID-19 pandemic, an event of global magnitude that affected the economy and society, and the entry of institutional investors into the market.

The latter increased speculation, a double-edged sword for all kinds of markets. On the one hand it generates rapid growth, on the other it creates the conditions for an equally rapid descent. This collapse actually occurred on the 12th of May 2021, the day when the price of Bitcoin dropped from around $60,000 to $30,000 in just a few hours. However, this collapse did not signal the start of a bear market as it was reabsorbed in the following months, allowing Bitcoin to reach another high in November 2021. The crypto bear market of 2022 began in the spring, the first catalyst for this bearish phase being the Terra-Luna ecosystem collapse of May 2022. As the months went by, events such as the FED raising interest rates and the failure of the centralised exchange FTX a few weeks ago further fuelled this bear market.

The biggest news in the latest phase of the crypto market, which runs from 2020 to today, concerns adoption. In past bear markets, so-called mass adoption, which was resolved in the number of traditional companies adopting Web3 technologies and the number of users using them, came to an almost complete standstill. The cycle we are currently experiencing seems different. Adoption is continuing despite the conditions of this bear market. An example of this trend is Polygon‘s blockchain, which signed important partnerships with companies outside the world of crypto.

The price differences between the 2018 and 2022 bear markets

So, what are the main differences between this bear market and that of 2018? Let’s look at it from the perspective of the price of the two highest market cap cryptos: Bitcoin and Ethereum. We can start by looking at the price level from which the two bear markets started: in 2018, Bitcoin’s price at ATH was $19,100 while Ethereum’s was around $1,400.

The bearish movement from the highest point reached by the price of Bitcoin to its lowest point in 2018-2019 lasted 364 days, causing BTC and ETH to capitulate at $3,200 and $150, respectively. The price swing was -84% in the case of Bitcoin and -95% in the case of Ethereum.

In the 2022 bear market crypto, the bottom for Bitcoin is for now, is around $15,500. It was reached on the 21st of November 2022, 375 days after the ATH was reached. For the price of Ethereum the situation is somewhat different. The ATH was reached on the 15th of November 2021 but the bottom is located, for now, at around $880, which was reached in July 2022.

Now that you have some information at your disposal, how much longer do you think the 2022 crypto bear market will last? Could the bearish phase have ended a few days ago with the drop to $15,735?

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