FTX's blowup is a turning point for Wall Street's crypto adoption journey
TGIF! It's Dan DeFrancesco checking in from NYC. This week has been a particularly long one, so please enjoy your weekend. You deserve it.
Today we've got stories on why you should be somewhat optimistic about a potential recession, more bad news for crypto, and a useful guide for what you should be streaming.
But first, where does Wall Street go from here?
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1. Is the institutional money still coming?
For the last few years, every conversation with someone about crypto would eventually lead to some version of this phrase:
"Just wait until the institutional money comes in."
For a while, it seemed as if the only thing people in crypto liked talking about more than their eye-popping returns was how much bigger they'd be once traditional finance finally woke up and got into the market.
In actuality, the concept was a bit of a misnomer, especially on the trading side. Traditional market makers entered the crypto market long ago and have done extremely well.
Big money managers, however, were resistant. But that all started to change in 2022, most notably at BlackRock, the world's largest asset manager, where real progressed was being made.
And then Sam Bankman-Fried ruined all the fun.
By now you're well aware of the debacle at FTX. The aftermath has led to lots of comparisons to blowups in traditional finance: Lehman Brothers, Bernie Madoff, Long-Term Capital Management. This is not the kind of company big-time money managers like to keep.
So where do we go from here? Was SBF and FTX an outlier event? The type that cannot be used to paint an entire industry in a negative light. Or is it a canary a coal mine? A warning sign for Wall Street to get out now before it's in too deep.
Insider's Rebecca Ungarino and Danielle Walker examined what the knock-on effects of FTX's blowup mean for Wall Street's crypto plans.
In the short term, the so-called "contagion" — every finance journalist's new favorite word — is fairly limited. But, as the story points out, the real risk is the reputational damage.
A key part of Wall Street's adoption of crypto was working with intermediaries bridging the gap between the two worlds. FTX's blowup could make those type of tieups — which seemed to be on the rise — that much harder to develop, Rebecca told me.
And while this won't happen overnight, she added, there is no doubt the seed of doubt has been planted in many firms' minds. Simply put: If it could happen to SBF, it could happen to anyone.
Personally, I could see this being a point of divergence or, to use some crypto verbiage, a fork for the industry.
Something that has been painfully obvious to me over the years has been the fact the checks and balances Wall Street believes necessary to do business go against many of the core ideologies of crypto.
Perhaps this is a chance for both sides to go their separate ways?
Financial firms can create some bastardization of digital currencies that they deem safe enough to use — something we've already seen to a degree — while crypto purist can continue on without concerns over having to acquiesce to the desires of a group they don't see eye to eye with.
Read more on how FTX's blow up might impact Wall Street' long-term crypto plans.
In other news:
2. Things are going to get bad, but not that bad. While plenty of signs still point toward a looming recession, there's a chance it could be a lot more manageable than many of us had originally feared (silver linings, eh?). Here's why some folks are optimistic after the latest economic data.
3. One of the families that served as inspiration for "Succession" might have more drama than the show. Paddy Manning, who just wrote a biography on Lachlan Murdoch, shared some of the palace intrigue taking place at the family behind Fox and News Corp. If it is to be said, so it be — so it is.
4. Things aren't looking so rosy for the people still at Twitter. They might have kept their jobs, but Elon Musk said in a late-night email that "the road ahead is arduous." Read the full memo sent to staffers.
5. Everyone has thoughts on Sequoia Capital losing the $213 million it invested in FTX. The VC giant announced Wednesday that it would be marking its position in the troubled crypto exchange to $0. Here's how the internet responded.
6. A startup that helps helps companies offer their employees personalized financial products just nabbed $33 million in funding. Brightside's Series B round included participation from famed investor Andreessen Horowitz. Here's what the fintech's planning to do with the cash.
7. Get a peek at the key people coaching up the next generation of great startups. We profiled the 19 group partners and visiting group partners at Y Combinator for the Winter '23 class. Check out their tips for how to be a successful YC founder.
8. Crypto can't catch a break. Coinbase is making its second round of layoffs this year, The Information reports.
9. With midterms now in the books, stay up to date on which states have legalized cannabis. For, uh, financial reasons, or whatever.
10. The ultimate solution to, "What should we watch tonight?" Here's a list of every American movie released on Netflix this year, along with how critics ranked them. Check out all 58.
Keep updated with the latest business news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief. Listen here.
Edited by Jeffrey Cane (tweet @jeffrey_cane) in New York and Hallam Bullock (tweet @hallam_bullock) in London.