Although China began to extinguish the ‘false fire’ of Online casino and How to find it hype in 2017, the so-called ‘wealth creation myth’ in the cryptocurrency circle still attracted many investors to enter. Now, as regulation arrives, losses will expand, and ecological operations will not be able to cover costs, how will this game supported by belief end?

　　Author | Tao Ting

　　Editor | Han Zhongqiang

　　Source | Market界

　　What is speculated is a mirage, but what is lost is real gold and silver.

　　In June 2015, the A-share market disaster, thousands of stocks were suspended, and the sight was all green. That year, many people lost so severely because they used high leverage to realize their dream of getting rich overnight. The cryptocurrency circle is the same. In 2021, the price of cryptocurrencies skyrocketed, with Bitcoin becoming the asset with the highest yield in the world. Many people increased leverage and entered the market. However, as the saying goes, ‘the peak is the beginning of decline.’ In 2022, the wind shifted drastically, and the price of cryptocurrencies plummeted, leaving many speculators with no return on their investment while the cryptocurrency circle also faced a major shakeup.

　　On December 20, the founder of the cryptocurrency exchange FTX, which went bankrupt due to ‘exploding’, SBF, was charged with eight counts by the US prosecutors. If all charges are proven, he could face up to 115 years in prison. Notably, on the same day, lawyers for a group of French cryptocurrency investors said they had filed a criminal lawsuit against the world’s largest cryptocurrency trading platform Binance, accusing it of misleading the public and promoting its services before it was legally allowed to provide legitimate services. Binance’s founder, former Chinese richest man Zhao Changpeng, is also facing unprecedented pressure.

　　On December 23, in response to messages such as ‘exchange suspension of USDC withdrawal (a fully collateralized stablecoin pegged to the US dollar)’ and ‘refusal to disclose financial information’, although Binance responded on its official website, the doubts from the outside world have not subsided.

　　Lost 2.5 million yuan in six days

　　Although China began to extinguish the ‘false fire’ of Online casino and How to find it hype in 2017, putting ‘protection locks’ on investors’ wallets, the ‘wealth creation myth’ in the cryptocurrency circle still attracted many investors to enter. Zhang Qi from Shenzhen is one of them.

　　At the end of 2019, Bitcoin led the market out of the correction, and then opened a round of sharp decline. Zeng Qi, who caught the timing, began to buy cryptocurrencies, including Bitcoin. In the rise and fall of the market, Zhang Qi also had gains and losses.

　　Until 2020, when the COVID-19 pandemic struck, the United States began to increase the supply of currency, and Bitcoin broke through several ten-thousand-yuan thresholds consecutively in March of that year, and finally broke through the 60,000-yuan mark in April. It was in the expectation that “Bitcoin is expected to exceed 100,000 US dollars” that Zhang Qi bought more cryptocurrencies.

　　Riding on this trend, he turned the original 300,000 yuan into nearly 10 million yuan. However, the change in the market is always unexpected. On May 19, 2021, the price of Bitcoin plummeted sharply, from around 43,000 US dollars to as low as 29,000 US dollars, with a daily maximum decline of 34%, and the price of Ethereum, another online casino, was almost halved.

　　From that day on, Zhang Qi’s investment profits began to erode, by the end of 2021, he had lost about 70%. On days when the market fell by 40%-50%, Zhang Qi was restless, “Even eating was stupid, I was in a lot of trouble.” It was this time that he almost lost everything, which made Zhang Qi calm down and enter a state of rest, “Difficult to predict and full of risks, it feels like the biggest casino in the world.”

　　Zhang Qi, who stopped trading, was lucky enough to avoid the great turmoil in the cryptocurrency circle in 2022, but Hu Yao, a 90-year-old in Japan, was not so lucky. He started buying cryptocurrencies in January 2021 after seeing some short essays on social platforms about “making 10 million yuan in 2 days by trading coins”. It was also at the beginning of 2021, during the period of the疯涨 of cryptocurrencies, that Hu Yao’s investment of 120,000 yuan in Ethereum increased fourfold to 500,000 yuan.

　　(Image source: Visual China)

　　After tasting the sweetness of “get rich overnight”, Hu Yao invested almost all of his money in Bitcoin and Ethereum in 2022. However, since November 2021, the cryptocurrency market has entered a long winter. Especially after entering 2022, the flash crash of the “Baijiu of the cryptocurrency circle” LUNA in May, and the great earthquake in the cryptocurrency circle that reached its peak on November 11th due to the bankruptcy of FTX.

　　From November 6th to November 11th, in just six days, “I lost 2.5 million yuan. During these days, the price of Bitcoin fell by more than 20%”, Hu Yao told the market on December 19th, “Now it is a loss to mine Bitcoin, and the electricity cost of the coins mined is not enough.” On the other hand, since he wanted to “change his destiny” through trading coins, Song Feng’s life indeed changed.

　　Before this, although he did not earn much, he slept well every day and lived a relatively fulfilling life. After entering the virtual currency market in May last year, Song Feng became extremely distressed, unable to sleep well every day as he watched the market, “When the market fluctuates greatly, my heart can’t take it.” Even if he made 50,000 yuan one night, Song Feng was not happy, but rather panic-stricken, “I am very clear that this is a gambler’s behavior, but I feel like I am trapped and do not want to give up.”

　　很快，现实给了宋枫一记重拳。2022年12月，在币圈持续大震荡中，他购买加密货币所在的交易所欧意系统出现了闪崩，所持加密货币无法卖出。在经历临近爆仓的极致痛苦后，宋枫盯盘一年所赚到的钱，包括那天晚上赚的五万元，以及一万多元的积蓄，最终都血本无归。事到如今，面对一团糟的现状，宋枫后悔极了，“如果重新来过，我肯定不会碰虚拟币，毫无前景”。

　　这仅仅是币圈的冰山一角。2021年5月19日这一天，有近60万人爆仓，超过440亿资金灰飞烟灭。2022年以来，币圈爆仓仍在加剧。Glassnode数据显示，截至2022年12月中旬，全球比特币投资者共损失1950亿美元，约合人民币13597亿元。大多数持有者以“割肉”的方式，出售了他们的比特币。

　　昔日令人趋之若鹜的币圈，究竟是怎么了？

　　币圈动荡背后

　　币圈曾经有多辉煌，现在就有多动荡。

　　币圈有一个故事广为流传。那是在2010年5月，一个比特币论坛上，有人购买了一块价值25美元的披萨，他用的是1万枚比特币。这是比特币的第一个公允汇率，对应的价格是每枚0.0025美元。

　　2017年底，比特币涨到了1.6万美元左右；2021年4月，比特币的价格一度超过6.4万美元。也就是说，比特币在十一年时间里，涨了2500万倍以上。如果当年有人投入一元，就变成了2500万元，而10元就会升值为2.5亿元。

　　然而，币圈不只有暴富神话。2022年，币圈前所未有的大震动，让巨量财富灰飞烟灭。这场“地震”始于加密货币LUNA币的闪崩。5月9日，市值曾高达410亿美元的LUNA币，毫无征兆地连续暴跌。仅几天时间，其价格就从接近90美元，跌至不足0.00015美元。

　　LUNA币几百亿美元市值的崩塌，不仅使无数投资者血本无归，更引得币圈千币齐跌。以比特币为例，5月10日凌晨起，比特币在十五分钟内暴跌超过10%，不少投资者盘中纷纷爆仓。币界数据显示，仅北京时间5月14日，全网Online casino and How to find it 合约共有逾16万用户爆仓，爆仓金额达21.2亿元。

　　多米诺骨牌效应爆发了。大多数Online casino and How to find it 行业龙头公司，通过裁员等方式“过冬”。据CoinDesk统计，截至11月30日，Online casino and How to find it 行业总计减少了超过2.6万个工作岗位。多家金融机构被曝无法兑付用户资产而走向破产清算，其中就包括币圈头部对冲基金三箭资本。

　　(Image source: Visual China)

　　这是币圈的多事之秋，在10月底到11月底，短短一个月时间里，有三名加密货币的掌门人接连猝死。而伴随着FTX在11月11日申请破产，其创始人SBF更是被美国检方提出八项控罪。如果所有罪名成立，SBF最高可判115年监禁。

　　币圈为何大动荡？得从它的起源说起。Online casino and How to find it ，其叫法源自于与实体货币的相对照。最早的Online casino and How to find it 是比特币，它是一种点对点和去中心化的数字资产，由日本人中本聪在2008年提出。由于采用密码学原理来交易，比特币也成了加密货币最早的一个种类。以比特币为参考发行的其它加密货币，还有以太币、莱特币、狗狗币、夸克币等。

　　加密货币的上涨与暴跌，与美联储宽松货币政策有直接关系。

　　美国传奇投资者，“新兴市场教父”马克·麦朴思（Mark Mobius）认为，在过去几年，美元货币供应量增加了40%以上，这让投资者有足够的现金来炒作加密货币。而2022年以来至12月，美联储已经七次加息。加息使市面上可用于投资的钱也相应减少。在加密货币价格与美国市场的一起下跌中，一些承诺与美元等法定货币等值挂钩，但又存在内在缺陷的网络稳定币（一种具有“锚定”属性的加密货币）被引爆了，进而影响了为加密货币提供杠杆的融资机构，包括像FTX这样的交易所。

　　但要说加密货币大动荡的根本原因，还得从它“是否存在价值”这一争议说起。还是以比特币为例，由于其本身与现实产业没有直接关联，使得其价格起落都脱离现实世界的产业限制，以及传统方法的控制。也正因为如此，比特币价格不断攀升中，各种加密货币的骗局层出不穷。

　　更重要的一点是，“加密货币市场的巨大交易额，正在影响各大机构、乃至各个国家的真实货币市场，从而带来巨头影响、国家管控的新问题。”复旦大学科研院邓峰曾提到。比如马斯克，就曾炒作技术基础非常薄弱的狗狗币，并引发其价格暴涨。

　　Moreover, the FTX that encountered problems this time was accused of money laundering and fraud by the US prosecutors because there was an $8 billion gap on the balance sheet of FTX. The U.S. Securities and Exchange Commission (SEC) said, ‘SBF misappropriated tens of billions of dollars of customer funds from the trading platform for his own personal interests and to help develop his cryptocurrency empire.’

　　’The crackdown on cryptocurrencies is just beginning,’ said Gary Gensler, the Chairman of the SEC.

　　In addition to the difficult situation of SBF, the founder of the cryptocurrency exchange Binance, and the former ‘China’s Richest Man’ Zhao Changpeng, the situation is also difficult.

　　Troubles of ‘China’s Richest Man’

　　Born in Jiangsu, Zhao Changpeng immigrated to Canada in his youth and founded the Binance exchange in China in 2017. In 2021, Binance not only became the world’s largest cryptocurrency trading platform but also, with a fortune of $95.8 billion, Zhao Changpeng became ‘China’s Richest Man’.

　　Before Zhao Changpeng could even get comfortable in his position, his personal wealth shrank from $96 billion to $11.6 billion in the great turmoil of the cryptocurrency circle this year, a loss of nearly 90%. When Zhao Changpeng fell from the position of ‘China’s Richest Man’, Binance also reached a dangerous moment.

　　Some media described Binance’s current situation with the following words: investigated by the US government, targeted by international short sellers, abandoned by audit firms, billions of funds fleeing, and Binance’s 120 million users restless… Zhao Changpeng’s crisis began with the bankruptcy of FTX.

　　In early November 2022, worried about FTX’s potential ‘death spiral’ (i.e., the continuous rise in debt without economic growth), Zhao Changpeng began to sell his 23 million FTX tokens FTT. Zhao Changpeng’s public sale triggered a panic sell-off among FTT token holders, which reached its peak on November 9th.

　　On the same day, Zhao Changpeng publicly wrote, more or less meaning: SBF asked me for help, hoping I would invest money to turn the tide. I agreed to save him. However, the next day, Zhao Changpeng wrote again, more or less meaning: The hole in FTX is too big, I won’t save it. After Zhao Changpeng made it clear that he would not invest any money, FTX declared bankruptcy on November 11th. When the myth of FTX’s wealth creation was shattered, Binance’s fate also changed.

　　What Zhao Changpeng did not expect was that the turmoil of FTX would also affect him. It was discovered by outsiders that Binance’s financial situation is even more opaque than FTXlottery online website and Where is it. After all, before the Merkle tree (a method to verify whether a cryptocurrency exchange has misappropriated user funds) was applied, most cryptocurrency exchanges were not regulated by regulatory authorities.

　　Dangers surged from all directions. On December 12th, Binance suspended the withdrawal of the mainstream cryptocurrency USDC for eight hours, which was considered ‘abnormal and extremely dangerous’ by the industry. On December 13th, investors withdrew $3 billion from Binance in a single day, far exceeding the normal withdrawal amount.

　　On December 18, Mazars, an American accounting firm, deleted the Binance reserve proof audit report from its official website and stated that it would no longer provide services to cryptocurrency exchanges; on December 20, a group of French cryptocurrency investors’ lawyers said that they had filed a criminal lawsuit against Binance, accusing it of misleading the public and promoting its services before it was legally allowed to provide services.

　　The most damaging is yet to come. The South China Morning Post quoted media reports that US prosecutors are considering bringing criminal charges against individuals including founder Zhao Changpeng to end the money laundering investigation against Binance.

　　(Zhao Changpeng, Source: Visual China)

　　Faced with concentrated ‘firepower’, Zhao Changpeng and Binance tried to demonstrate the safety of their assets to the public through methods such as Merkle tree verification, promoting asset transparency, and frequent interaction with users. However, in the eyes of the public, the key to Binance gaining user trust is to publicly disclose transparent financial data.

　　After much anticipation, Binance finally spoke out. On December 23, 2022, in response to market rumors and messages such as ‘the exchange suspended USDC withdrawals’, ‘Mazars and the four major accounting firms refused to serve Binance’, and ‘Binance refused to disclose financial information’, Binance made a response.

　　Binance stated that during the suspension of USDC withdrawals, users can still normally withdraw other stablecoins, and there is no liquidity problem. Regarding the message ‘accounting firms refuse to serve Binance’, Binance responded that Mazars is not only targeting Binance, and for traditional accounting firms, it is very difficult to verify the overall reserve assets of a cryptocurrency exchange on the chain.

　　In response to the rumors about ‘Binance refusing to disclose financial information’, Binance stated that it is a private company, not a publicly listed company, and its financial health does not require external financing, so there is no need to disclose detailed financial information. In response to the media report that ‘the US Department of Justice is investigating Binance’, Binance said that this is not the first time the media has made such a report, and it is currently unable to respond to any controversial judicial discussions, and emphasized that its exchange ‘has the most compliance licenses/certificates globally and invests the most in combating crime’.

　　Although Binance has responded one by one, it is obvious that the outside world’s doubts will not disappear before its financial data is transparent. In fact, the survival space of Online casino and How to find it is becoming narrower and narrower.

　　There is not much time left for space and time.

　　In the past few months, Huang Lichong, co-founder of the Alliance Strategy Management Group familiar with American law and stocks, has been helping a local fund company in the United States promote the issuance of virtual currencies. The fund company plans to issue new encrypted currencies such as stablecoins. They hope to launch the project before June 2023, as the strong regulatory regulations led by the United States for lottery and How to find it are expected to take effect in June. The fund company’s original plan was clear, but everything changed with the bankruptcy of FTX.

　　Before the FTX bankruptcy, the situation was also severe, such as the acceleration of legislation on cryptocurrencies by the US executive order, along with the Treasury Department and other departments, and the passage of the historic ‘Markets in Crypto-Assets Regulation Bill’ by the European Union in October, ‘In some places, as long as they meet the Howey test standards of the US Supreme Court (a test to determine whether a cryptocurrency should be classified as a security), they will not be defined as security tokens (tokens that give holders the expectation of appreciation, rely on others to build an ecosystem, operate in a centralized manner, the income is used for investment ecosystems or projects, and the investors’ returns depend on others’ profits can all be defined as security tokens).’ Huang Lichong told the market.

　　Although according to the above standards, the SEC believes that the logic that any lottery and how to find it are security tokens is correct, in fact, the SEC has not strictly enforced the law. The bankruptcy of FTX has made the attitude of the US Securities and Exchange Commission firm and serious, and now they believe that: including functional tokens (generally referring to tokens with existing trading history, using distributed ledger or blockchain, immutable, decentralized, and able to be transferred without a third party) in online casinos and how to find them are unregistered securities that violate securities laws.

　　That is to say, under the long arm jurisdiction of the US regulatory authorities, ‘Any digital token identified as ‘investment contract digital token’ can potentially be subject to cross-border enforcement if it is sold, promoted, or violates US domestic regulations to any US citizen, US tax resident, or US company, or if it is promoted, sold, or violates US domestic regulations in the United States, Hawaii, Puerto Rico, or the US Virgin Islands,’ Huang Lichong explained.

　　This means that the cryptocurrency project designed by Huang Lichong requires adjustments according to the legal structure designed before the FTX bankruptcy order. The old legal suggestions can no longer keep up with the expected regulatory changes, ‘Even if the project is ultimately successful in issuance, it will face high legal risks, basically with no effective methods to avoid them, and it is not as simple as hiding on an offshore island to resolve the issue. In the long run, it will end up in a mess.’

　　
lottery victory and Where is it
　　(Image source: Visual China)

　　In fact, the costs in terms of technical maintenance, ecological chain, supervision, and compliance for online casinos and how to find them are much higher than those for traditional securities. They all hope to maintain a balance between income and expenditure by avoiding compliance costs, but even so, the lottery and how to find it exchanges still find it difficult to make a profit. Coinbase, listed in the United States, which is considered the most mature digital exchange in the cryptocurrency circle in terms of compliance, is also in a state of loss and shrinking revenue.

　　The Coinbase financial report shows that the third fiscal quarter of 2022 incurred a loss of 5.45 billion US dollars, marking the third consecutive quarterly loss. Due to the increase in compliance costs, listing fees, and a decrease in trading, Coinbase has incurred a loss of 12 billion US dollars over the past 12 months. ‘In the era when online casinos and How to find it are globally hot, exchanges rely on high listing fees to earn a small profit, and the rest are still in the red, relying on market manipulation to cover costs. When regulation comes, losses will expand, and the operation of the ecosystem will not be enough to cover expenses.’ Huang Lichong analyzed and pointed out. This is also one of the reasons why most online casinos and How to find it have reached a dead end, with FTX being the most representative example.

　　This is not the fault of blockchain technology, but similar to the 2002 Internet bubble crisis. Huang Lichong explained that the reduction in costs and the wide application of technology cannot support the operation and ecology of exchanges and virtual currencies. When financial bleeding continues, the operators of the ecosystem will take desperate measures, forming Ponzi schemes. For example, manipulating prices, creating false markets, selling at high prices to subsidize operations, including high-priced pledges to third parties and withdrawing loans, ‘Maintaining the ecosystem with such means can only lead to running away. This behavior has already been a financial crime, but no one has paid attention to it before.’

　　Huang Lichong also told the market that although local regulators in non-common law regions (common law system generally refers to the British and American legal systems) can take action, the US regulators can also block the customer accounts of foreign banks providing US dollar services. Both ‘lottery with a return expectation’ and ‘How to find it’ are ‘unregistered securities offerings’, and the ‘air coins’ with no real value are likely to violate securities laws as well. ‘Most online casinos and How to find it in the future will be difficult to escape, but due to limited regulatory power, it is impossible to enforce the law on all of them.’

　　In fact, a large-scale suppression action is also taking place worldwide. According to the report of 21st Century Business Herald, Jon Cunliffe, Deputy Governor of the Bank of England, said that digital currencies and services should be subject to stricter regulation. South Korea’s regulatory authorities emphasized that a comprehensive regulatory framework is expected to be completed next year. This means that many digital currencies will be affected globally.

　　Once at this stage, investors trying to escape will cause a stampede, ‘Loss of all investments, perhaps is the ultimate destination.’ Huang Lichong judged. For this reality, Song Feng is extremely distressed. On the one hand, he also understands that trading digital currencies is a kind of ‘gambling’; on the other hand, he is constantly immersed in it because of the desire to ‘recover the capital’. He also doesn’t know why he is like this.

　　Although gambling and game design, due to the use of psychological and physiological knowledge, stimulate the secretion of dopamine and make people eager to continue, their essence is still a game of confidence. When people lose confidence, the game will come to an end.

　　(Song Feng, Zhang Qi, and Hu Yao are pseudonyms in the text)

　　(Declaration: This article represents the author’s views and does not represent Sina’s stance.)