Kevin O’Leary, a venture capitalist and TV personality, stated that he will continue to invest in cryptocurrencies despite the FTX debacle. Here are the details…
Kevin O’Leary: I will buy more cryptocurrencies
O’Leary was an investor at FTX International, as we reported on Kriptokoin.com. He said he made a bad bet but he’d learn from it. Institutional investors and venture capitalists (VCs) have come under scrutiny for missing all red flags in FTX, including their relationship with Alameda Research and the complex institutional structure. This is the first time institutional investors have encountered such a situation when they start to enter the crypto space in 2020. However, O’Leary says he will still continue to invest in cryptocurrencies. O’Leary uses the following expressions:
I will still invest in crypto though. I lost money in my accounts. However, that doesn’t stop me from buying more. I’m going to do that too. I take advantage of the fact that most of these currencies, tokens and coins have definitely dropped as a result, possibly presenting a buying opportunity. This is my point of view.
Institutional investors are witnessing something like this for the first time in the crypto space.
Institutional investors are thought to be ignorant of many things about crypto. Therefore, it is believed that they did not do a good job in due diligence. But O’Leary says that won’t happen again. He claims that institutional investors and VCs will not fund new crypto exchanges unless they are regulated. However, the only regulation he mentioned was the Stablecoin Transparency Act, which requires auditing of stablecoin issuers like USDC or USDT.
The problem with FTX had nothing to do with stablecoins. The problem was that the funds were used in other investments without the consent of the clients. Therefore, the main issue here is “custody”. The crypto space is trying to solve this issue with things like “proof-of-reserve”, at least quarterly inspections, internal insurance fund. For example, Coinbase states that “some of the coins in our storage systems are insured against loss from theft.”
However, there are no regulations to prevent a CEO from stealing or misusing the funds given to him. But there are systems in crypto that minimize these transfers. This can be an internal multi-signature, but also an external measure where a third party has one of the keys. The only real solution to all this is “self-custody”.
According to experts, the root of the problem is in the fiat system.
O’Leary continued to talk about FTX while pointing out that he will still invest in crypto. Institutional investors noted that in many ways, FTX has nothing to do with crypto. He suggests that he is aware that this is a product of the fiat money system. This issue is not crypto specific, nor is it even caused by regulation or lack thereof. Pointing to Wirecard, the Archegos hedge fund, Theranos, which recently had problems. Instead, the problem is the need for a central database, even for digital transfers.
So fiat money is still based on the paper system. He argues that the system allows the CEO of any exchange to steal funds. Many people think that cryptocurrencies will be integrated into our lives in the coming period. Therefore, if systems like stablecoins are integrated where everything is “crypto,” there will be no need for centralized custody services, according to some. In case of hacking, theft or loss, the solution will probably be insurance.
According to experts, global payment systems that crypto will integrate can strengthen trust instead of undermining trust in crypto. Because it shows what crypto is trying to solve. However, according to experts, modern banking systematizes operations like FTX. Just like FTX short selling client funds. The only difference is that they are salvaged in a system where trusting relationships are not necessary and therefore trust cannot be abused. Cryptocurrencies are still in their early stages and according to many, it is necessary to deal with the problems of the fiat system right now.
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