Keller @ Large: Did FTX downfall expose crypto industry as a scam?
BOSTON -- The economy is always top of mind for Massachusetts residents so WBZ-TV's Jon Keller checks in with author, investor, and Babson College associate professor Peter Cohan.
Recently, there were 10,000 layoffs at Amazon. Is this a correction or a of a lasting bust?
"Definitely not the sign of a lasting bust," said Cohan.
He pointed out that Facebook and Snap have both laid off people that work in digital advertising, an area of the economy that's currently struggling.
"It's basically cutting back on jobs and cutting back on resources in parts of the company that aren't doing particularly well, but they have other parts that are doing well, at least at Amazon," Cohan said.
One thing that did happen is there was a tremendous growth and demand in 2021. That growth and demand caused them to staff up tremendously and perhaps they were expecting that to continue into 2022 before November of last year when the fed came in and said we're going to do something about inflation... As soon as the feds said we're going to do something about inflation, that really hit the markets really hard," said Cohan. "The economy opened up. People were not engaging in the kind of behavior they were during the pandemic. The pandemic, the government decided it was over. That meant people were going outside instead of buying stuff. So all these companies that were based on online buying and people having things delivered to their houses, it kind of went away. So they had all these extra people who weren't really doing anything."
Watch Part Two:
FTX Trading, once the world's second-largest crypto exchange, declared bankruptcy last month amid an $8 billion shortfall. Founder and CEO Sam Bankman-Fried has resigned from the company, but Keller asked Cohan how did Bankman-Fried get this far?
"I don't really understand why he was able to get so much support from people. Clearly, he has the magical powers that a small number of people in our society have to make people suspend their critical thinking and do whatever they want," Cohan responded.
On the cryptocurrency industry in general, Cohan said: "I tend to lean toward the whole thing being a scam."
