What we taught us in Krypto this year

at various places in 2022-especially since the breakdown of the Terra/Luna ecosystem in May and then the FTX exchange in November-people suggested that I drive a kind of virtual round of victory because I have called for the steaming bunch for several years.

and I guess I feel a certain feeling of justification when I see how the market begins to implode after I have asserted myself against numerous crypto brothers who tell me that I should "have fun staying poor". But I hesitated to write a "I told you" because I am not sure if I really did it.

In April I explained why I still refuse to take crypto seriously, although many supposedly serious people do this. (Since then the market has more than halved.) In May, I morally argued against crypto and argued that it was not just a "harmless fun" for the many that could not afford it. (FTX has lost about $ 8 billion and thus ruined the life of many of its customers.) And last year I argued that NFTS was not the future of art or property, but only the latest crypto scheme to quickly get rich. (Nowadays Donald Trump is the only person who seems to find them cool.)

But I never called the top of the market - given the fact that the whole thing is based on pure belief, it always seemed to be a stupid acquisition - and I certainly did not predict exactly how it would be disguised. In many ways, I was shocked myself about what happened in the crypto world last year. It has proven to be shameless, dishonest, networked and imaginative than even its strongest critics could have imagined.

What specifically learned from all of this?

Firstly, the entire ecosystem was supported by a much larger leverage than anyone thought-and this was the borrowing of real money, not just the magical consequences of 1 and 0, from which crypto tokens consist of. This meant that many platforms-such as Celsius and Voyager-were simply wiped out after billion dollar holes when the interest rates from the level close to zero, from which the entire market emerged, began to rise, and when crypto prices faded in their balance sheets. You need real assets to cover real liabilities, as it turns out (OK, yes, we knew this part).

Secondly, the idea that the crypto world is decentralized was buried this year once and for all. We already knew that the vast majority of crypto activities take place on strongly centralized stock exchanges and that power and wealth in crypto are even more concentrated than in the traditional financial world. But in 2022 the year we found out was to what extent Big Crypto is a real thing: a cartel connected to interconnected actors of stock exchanges, stable coin companies and crypto networks that work together via group chats-a signal chat allegedly called "Exchange Co-Ordination" and included FTX, Binance and Tether.

Thirdly, the economy of the cryptoma market may have a pyramid or ponzi-like structure, but it is also circular. Crypto companies not only counted their own worthless tokens as money, but also those of others. As Martin Walker from the Center for Evidence Based Management and long-time crypto critic expresses it towards me: "Your books are full of nonsense token and those of her friends", and if one of them implodes, "whole chunks of the industry can quickly disappear".

Fourthly, the breakdown of so many crypto exchanges and platforms enables us to see the complete lawlessness that crypto drives for the first time. Freed from the annoying regulatory yoke with which the non-crypto world has to deal with, companies such as FTX were supposed to do what they wanted, supposedly misappropriating billions of dollars of customer money and committed to a large scale. "My great realization from this year is that we could see in the Black Boxes, and it was even more frightful. When we expected," says the software engineer and crypto critic Stephen Diehl.

During an interview for an FT event last month, I asked Charles Hoskinson, founder of the crypto token Cardano, whether it was possible that Krypto will collapse to zero. No, he said - hardly surprising, but his reason amazed me: "At that time it was basically a religion." He, a crypto prophet, seemed to pronounce the quiet part loudly.

This is the last thing I learned about crypto this year: it has a strange resistance. The market and many of the largest platforms could have collapsed, and the prophets and core teachings of this quasi-religion could have proven to be wrong. But many people are still ready to expose their unbelief and cling to the hope that their miraculous internet money could one day resume their trajectory.

jemima.kelly@ft.com