Was Bloomberg The CNBC Of Crypto?

[Editor’s note: The original version of this article referred to “DeFi yield farming,” as opposed to just “yield farming.” The distinction between centralized exchanges and DeFi is critical, of course, but one of the great ironies of the FTX saga ended up being that Bankman-Fried effectively commingled the two. So, far from the protestations of DeFi believers who insisted that FTX’s bankruptcy actually made the case for DeFi, Bankman-Fried, and particularly the way in which FTX carried its Serum stake, actually made the case for how DeFi can end up becoming the punchline of a centralized exchange implosion.]

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You know what really grinds my gears, to quote the great Peter Griffin?

Well, I’ll tell you. It’s the financial media’s penchant for implicitly claiming, after a bubble bursts, that they either knew it all along or, worse, didn’t participate in stoking the mania.

That criticism isn’t confined to the mainstream financial media, by the way. Some of the most notorious bear blogs and many widely followed social media accounts belonging to ostensible market skeptics, were instrumental in facilitating the crypto bubble.

And, look, to be totally fair, crypto bubble facilitators were right! I’ve said this a dozen times if I’d said it once: Bitcoin went from nothing to $60,000. So, people like me were spectacularly wrong, and the delirious “coiners” were correct in equal measure. Now, though, the macro regime has shifted such that inflation is elevated and central banks are compelled to fight it, which entails the end of the free money regime.

Rather than explain the situation that way, the financial media, both mainstream and otherwise, is engaged in an effort to wash their hands of crypto in the wake of the FTX fiasco. Consider the passage (below) from Saturday’s “Weekend Reading” e-mail from Bloomberg:

At his peak, crypto mogul Sam Bankman-Fried was worth $26 billion. At the start of this week, he still had $16 billion. Now: A whole lot less. The collapse of FTX.com — the biggest bankruptcy of the year — provides another lesson in what happens when the hype of personality meets the cold wind of reality. Digital assets were supposed to revolutionize finance, but the same old mistakes have been committed. SBF made all sorts of lofty promises, including big plans to donate his crypto wealth as part of a movement called “effective altruism.” For many retail traders who poured their life savings into digital assets, the collapse of his empire marks the end of the line. The venture capital firms who gave the digital wunderkind a pile of money without demanding he establish oversight over FTX could arguably bear some of the responsibility. And all of this is just the beginning. With the US Securities and Exchange Commission and the Justice Department now investigating, and people like ex-Treasury Secretary Larry Summers making Enron comparisons, the road ahead for SBF and what remains of FTX may be bumpy indeed.

It’s impossible for me to countenance that. You could easily argue that Bloomberg (the media-data conglomerate, not the man) perpetuated every aspect of the crypto mania more so than any other outlet, major, minor or in-between including, by the way, sites whose sole focus is crypto.

Bloomberg created indexes, shifted personnel and resources, dedicated countless hours of coverage to the space and spent God only knows how much on content development. You could argue that Bloomberg is to crypto what CNBC was to the dot-com mania.

Consider in the excerpt (above) the newly derisive reference to Bankman-Fried’s “hype of personality.” I don’t know how many articles Bloomberg published on Bankman-Fried over the past year or so, and I haven’t conducted any sort of natural language processing experiment to determine what the overall tone of the articles they did publish was. But anecdotally, I think it’s fair to say Bloomberg was swept up in the very same “hype of personality” they now lament on behalf of everyone else.

In August of 2021, Bankman-Fried chatted with Tracy Alloway and Joe Weisenthal. Again. It was the second time in six months. They brought along Matt Levine.

“We talked to [Bankman-Fried] not too long ago… and it feels like his star has only, like, gone up, by like 10X,” Weisenthal gushed. “So, Sam, $900 million is a lot of money,” Alloway giggled, referencing the most recent round raised by FTX, which would be bankrupt a scant 15 months later. “What are you going to be doing with that?” “Yeah, so, I think we’re looking good on the yacht front,” Bankman-Fried joked. “Don’t need any more there.”

It was that bad. But it got immeasurably worse during yet another audio roundtable convened eight months later, in April of 2022. “All right. I’m really excited. We’re gonna be bringing back, for his third time on the show, the one and only Sam Bankman-Fried,” Weisenthal said, setting up what might be characterized as the white collar equivalent of OJ Simpson’s “If I Did It.”

“There’s a huge tidal wave of money trying to come into this space,” Bankman-Fried began. “Just sort of, you know, gobs and gobs of it… trying to find its way in over the last few years, every month, another sort of, like, nice little pile of that.”

You really can’t make this up. It’s so great. Or so terrible. Depending on whether you think this is funny, which, admittedly, I kind of do now. Later, Alloway said that, “… it feels like the market is in the process of maturing. And it also seems like FTX’s whole purpose is to improve liquidity in crypto trading.”

Who could’ve known, all the way back six months ago, that FTX would become synonymous with crypto liquidity crunches?

Three people who could’ve known were Alloway, Weisenthal and Levine, because later, in the same conversation, Bankman-Fried walked through a 1,045-word description of yield farming dynamics, interrupted only intermittently, before Levine ultimately said, to Bankman-Fried, “I think of myself as, like, a fairly cynical person. And that was so much more cynical than how I would’ve described [yield farming]. You’re just like, ‘Well, I’m in the Ponzi business and it’s pretty good.'”

Here’s the thing: Whatever you want to say about Alloway and Weisenthal, Levine is no lightweight. If you’re Levine, and that’s your assessment of what’s just been said to you by someone who’s a billionaire, the conversation ends right there. Or, if it doesn’t, it turns significantly adversarial. But it didn’t turn adversarial. Instead, Alloway, Weisenthal and Levine let Bankman-Fried “play around with this a little bit” (his words).

Although Bankman-Fried received a lot of what I’m sure Alloway, Weisenthal and Levine would described as “pushback” over the course of the discussion, the conclusions drawn were disquieting, as was the way in which those conclusions were dismissed with little more than a quizzical eyebrow raise. “The highlight was definitely Sam’s description of yield farming that even a sort of crypto cynic…” Weisenthal started. “As a magic box that you put money into and more money comes out?” Alloway said, finishing his sentence. “Yeah. I don’t really know what to say about that,” she added.

I do. I know what to say about it. Without accusing Bankman-Fried of wrongdoing (he, like everyone else, is innocent of anything and everything until proven otherwise), what you say about a magic box is that magic boxes don’t exist. And that if the best description of DeFi protocols (or yield farming more generally) is that they’re magic boxes, then DeFi (or yield farming) is a giant Ponzi scheme. Do you know who said that earlier this year, after spending three months, and $20,000 wandering around in Web3 casinos? I did. I said that. Right here, in these pages, and on more than one occasion.

Weisenthal summed it up. “So, the way DeFi works is you put money in a box that you think more people will put money into. And the way VC works is you hear what your friends in the industry are investing in based on 2027 numbers. And then you also wanna get on that. So it’s really just FOMO all the way down,” he said.

Yeah, Joe, “all the way down” is correct. All the way down to zero, in fact, for the VCs involved in Bankman-Fried’s boxes.

But look, it wasn’t just Alloway, Weisenthal and Levine who entertained Bankman-Fried. David Rubenstein interviewed him for an episode of “Peer-To-Peer” conversations in August. I wonder if Rubenstein still counts Bankman-Fried as a “peer.” They certainly aren’t “peers” in terms of net worth anymore.

If I were Bloomberg, I’d pull that interview from YouTube, or at least turn the comments off, because the internet is having itself a field day. “The obvious nervous shakes on SBF’s legs while he’s talking about source of funds! OMG” one person exclaimed. “Who’s here after the blow up of FTX? :D” said another. And still another: “Visiting this after the news.” And another still: “Oh this interview is sure gonna blow up now.”

All of that, and Bloomberg’s Editorial Board had the nerve to write, on Thursday, that “various mechanisms have emerged to make traditional financial institutions more resilient. If crypto intermediaries want to act as reliable conduits for investment in a technology that may yet prove useful, they’ll have to submit to much of the same. Until then, beware: They’re not worthy of your trust.”

I’m sorry, but f–k that. If Bloomberg’s management was so concerned about protecting the public from crypto, and particularly from FTX, they had every opportunity to do so. Instead, what’d they do? They poured resources into blanket, around-the-clock crypto coverage, and dignified someone who’s now sure to be remembered as the poster child for crypto gone wrong. They entertained him three times on what’s supposed to be their smartest program (Odd Lots) including two episodes co-hosted by someone (Levine) who’s supposed to be, in Alloway’s words, “one of the best — probably the best — financial writers out there, if we’re being honest.” (Incidentally, I’m the best financial writer out there, “if we’re being honest,” and if I’m not, I know who is. He’s not called Matt.)

At the end of the day, this is a cautionary tale. And not just about crypto. We’ve heard it time and again, but we never internalize the message.

We (all of us) generally know when something doesn’t feel right, but the profit motive overwhelms our better angels. Note that in the context of the financial media, it’s not profits associated with trading, it’s profits associated with eyes and ears — profits associated with web traffic and podcast streams, or, in days long gone, ad-sponsored television shows and newspapers.

In this case, Levine almost surely doesn’t need the extra money he gets from writing. Rubenstein doesn’t need any extra money at all. And Alloway and Weisenthal are obviously just doing their jobs, as are the countless journalists whose bylines appear at the top of crypto articles. I doubt seriously any of those people get a bonus based on how well a given episode of Odd Lots is received or how many page views a given article gets.

But Bloomberg as a media-data conglomerate is absolutely concerned about staying abreast of whatever’s “hot” or, even more so during crashes, whatever’s “cold.” In the context of crypto, that manifested in hair-on-fire coverage of the boom and now, sanctimonious coverage of the bust.

Remember, folks: You’re rarely a viewer or a reader when you consume ostensible news. Rather, you’re precisely that — a consumer.

Media outlets compete for your attention not because they want to educate you, but because they want to exploit you for revenue. They want to monetize you. The more excited you are, the easier you are to exploit. And crypto is pretty damn exciting.

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