How FTX CEO Sam Bankman Fried Navigates The New Normal Of Trading

What really happened on crypto’s so-called “Black Wednesday” earlier this month — and what can we learn from it? On May 19, a day when tweets and headlines criticized Bitcoin’s environmental impact, the crypto market crashed. Bitcoin prices tumbled from euphoric highs of over US$55,000 to under US$40,000 that day, and in the days since continued to plummet, to bottom out at around US$30,800, according to CoinMarketCap data. But despite that volatility, crypto’s underlying fundamentals and the factors that affect long-term prices have not changed, according to FTX CEO Sam Bankman-Fried. “I don’t think there is anything really fundamental that changed from [May 19] to today,” Bankman-Fried said in an interview with Forkast.News. “I don’t think it’s really caused by economic fundamentals. I think it was 10% of that and 90% was just liquidations.” As Bankman-Fried suggests, US$7.56 billion worth of Bitcoin long positions were liquidated on the fateful day with FTX contributing US$110 million, according to bybt data. While crypto still remains a disruptive technology that can revolutionize the finance industry, trading behavior in the blockchain world and the traditional equities has become analogous as a result of prominent figures that now have a platform to — directly or indirectly — impact markets. “It’s not like both crypto and stocks have their own charismatic guy who when they tweet, the thing goes up — it’s the same guy. Elon Musk in both cases,” Bankman-Fried said. In the equity market, an asset that has its values driven by social media sentiment rather than company performance is coined “meme stocks”, as popularized by the now-famous GameStop phenomenon. “All of a sudden for the first time, you had 15 million day traders get together and talk to each other… all of a sudden they each have a thousand dollars to trade. Now they have US$15 billion between them,” Bankman-Fried said. As the event sparked questions on collusion in meme trading events among retail investors, Bankman-Fried argues that the definition of collusion was never all that clear. “For instance, it’s totally fine for a bunch of people to get together and have a factual debate about a bunch of companies and just say a lot of true statements with the goal of figuring out the truth,” Bankman-Fried said. “It’s not exactly collusion, that wasn’t the goal of it, but it is an activity that correlates their behavior.” While social media has been an important contributor to the price fluctuations of Bitcoin and other cryptocurrencies in the past, Musk’s ability to send the price of Dogecoin to the moon was a spectacle unto itself. “Dogecoin was amazing for recruitment for crypto… It also got a lot of disgust in crypto. It is a double-edged sword,” Bankman-Fried said. “Most these coins aren’t getting anyone in, they’re just pissing people off.” Watch Bankman-Fried’s full interview with Forkast.News to learn more of his insights into the recent crypto market crash, how FTX develops creative financial products, and what the future world might look like with decentralized finance (DeFi).