FTX killed crypto, long live Bitcoin

The FTX crash has revived the “Bitcoin maximalists were right all along” narrative.

Given the size of the troubled exchange and the number of entities trapped on its web, the FTX scandal has been dominating the headlines of late.

Worse yet, each passing day seemingly brings new twists that point to serious failings within the company and among the regulatory bodies that were supposed to prevent such scandals from happening in the first place.

In particular, questions loom over the political influence and connections of Sam Bankman-Fried (SBF), as well as FTX’s apparent “pass” with the Securities and Exchange Commission (SEC).

Behind the veil of high-profile celebrity and sports endorsements, FTX managed to build a trustworthy reputation within its relatively short three and a half years of existence. Although skeptics said that the red flags were always there, that is no consolation for those who put their trust in FTX and lost big.

At the center of the scandal is FTX’s native FTT token and the way it was managed. In the course of a liquidity stress test, it fell short of justifying its lofty pre-crash market capitalization valuation of $3.4 billion.

The net result of the scandal is the loss of billions and an industry struggling to preserve what little reputation and credibility it has left.

The bankruptcy has undoubtedly birthed a new wave of Bitcoin maximalism and, as some might say, his virulence towards sh*tcoins has proven accurate time and time again.

Bitcoin self-custody as an answer

The leading cryptocurrency has a simple design and is generally a dinosaur in terms of technology. However, the maxis point out that these same “deficiencies” are what make Bitcoin the only digital asset that can be maintained.

On the grounds that Bitcoin does not have a supervisory base, crooked incentives, or groups with special rights, the maxis argue that the principles of decentralization, transparency, and immutability are applicable only to BTC.

Passionately defending this point of view, the Bitcoin-only crowd has been labeled toxic and narrow-minded in the past. However, the events of the past week show some degree of truth, at least from the perspective of anti-Ponzinomics applied to token swapping.

With hit after hit coming from Celsius, BlockFi, Voyager, Terra Luna and more, the penny is starting to drop. Trust, simplicity and honesty trump performance and short-term gains.

As the industry emerges from the FTX black swan, the BTC maxi move will only get stronger.

Altcoins are “evil”

chain analyst jimmy song wrote a lengthy article on the “moral case against altcoins.” He covered a variety of points against altcoins, including the false use of BTC legitimacy and the influence of short-term incentives from venture capitalists.

He argued that “altcoins are bad” and simply mirror the fiat system but in a new package. With that, their proliferation will not lead to financial freedom, as is often the goal of many who enter the crypto space. Rather, the existence of altcoins just confuses cryptocurrencies from the perspective of getting the real thing, i.e. Bitcoin.

Furthermore, Song argued that the altcoin space makes it difficult for Bitcoin to be adopted, preventing those who need it most from acquiring it due to drawing attention to newer, shinier projects.

“Altcoins are a cesspool of theft, cronyism, and rent-seeking. Altcoins are built on the reputation that Bitcoin has worked hard to achieve. They enrich venture capitalists and altcoin pumpers at the expense of the poor and vulnerable.”

Most would have labeled those views as extreme in the past, or perhaps too black and white. However, CeFi’s incessant scandals this year have pushed more people to accept these points.

On-chain data shows the penny has fallen

Despite the selling pressure affecting the Bitcoin price in the short term, long-term HODLers continue to believe.

The HODL Waves chart shows the amount of BTC in circulation divided by age bands that represent the last time the supply moved.

The following graph shows a strong rebound in the age group of more than 10 years. This has been a noticeable pattern since around 2020. However, the >10 year wave continues to widen as BTC price falls.

In addition, the combined total age groups reach 76%, a new all-time high.

Bitcoin HODL Wave
Source: Glassnode.com

Analysis of active supply over longer time intervals shows an overall upward trend across all categories for more than a year. The most active since 2022 is the red group from more than 1 year ago, which suggests that relatively recent entrants are going maxi.

Last active Bitcoin supply
Source: Glassnode.com