Investors lost significant funds they thought to be in safe hands, and the broader market was left reeling as Bitcoin plummeted to its lowest since 2020. The community was left stunned, wondering how FTX and CEO Sam Bankman-­Fried, with their pristine reputation, could implode so quickly. Since then, pundits and experts are heralding an end to the so-called “crypto winter” – and the arrival of an ice age.

Sceptics are predicting “the end of crypto,” while comparing FTX to previous trainwrecks like Enron or Lehman Brothers and repeating, “I told you so.” However, despite the apocalyptic rhetoric, it’s safe to say that the industry is not dead but at a crossroads. We could either collapse under the weight of recent troubles or use this as a chance to reflect and rebuild. It’s time for the community to pause, analyse, and learn from its errors rather than dooming itself by repeating them. We must consider a few crucial points arising from this debacle. The impact of social influence on crypto for one: Leaks initiated the collapse, but Binance CEO Changpeng Zhao added fuel to the fire by tweeting that his firm would sell its FTX holdings due to “recent revelations.” Investors panicked, and things spiralled.

The outcome now makes us question Binance’s role, and the power exchanges have held since Ethereum’s inception. Centralized exchan­ges gave issuers trading venues. They lured them with initial exchange offerings equivalent to initial public offerings and grew unopposed. Thus, CEOs made billions, becoming celebrities.

However, the power and success came with a lack of due diligence. Reports show that FTX operated with impunity and had gambled with clients’ funds. Like Terra/Luna and Celsius’ crashes earlier this year, FTX’s demise shows a trend of bad practice in an industry that, ironically, is looking to bring further transparency to the world.

The private sector can only hold some blame. There are regulatory inefficiencies that must be addressed. Despite its Bahamas HQ, FTX began in the US, where many firms leave due to its challenging regulatory framework. The SEC’s litigation record against crypto forces many out of the country and into regions where they can operate with minimal scrutiny.

We can no longer turn a blind eye and prioritise glamour and success while allowing bad actors to thrive and tarnish the industry. Crypto has the technology and attributes to avoid the mistakes the traditional industry has repea­tedly made. Holding each other accountable, like we’re used to doing in the Swiss ecosystem, is essential for healthy growth. We must learn from the past few months, or we’re bound to repeat them, and if we want to regain trust, that’s something we cannot afford.

Sheraz Ahmed is Managing Partner at Storm Partners, Europe’s leading blockchain service provider. He also supports the local Swiss ecosystem as the Co-Executive Director of the Crypto Valley Association. Ahmed has advised hundredsvof organisations on implementing modern practices. His mission is to drive growth, collaboration, and integrity across the Web3 world.

Text: Sheraz Ahmed
Illustration: Valentin Berger