Miami Beach, FL, November 11, 2022 --  

Miami's mayor shilled for doomed crypto ventures. Their inevitable collapse brings embarrassment to a what should be a world-class city.

Wen 30-foot high letters FTX were unveiled on the roof of Miami's basketball stadium two weeks ago¹, hope still remained that the city would emerge as a cryptocurrency powerhouse. The U.S. subsidiary of FTX had announced a month earlier that it would move its headquarters from Chicago to Miami², a moved praised by crypto-loving Mayor Francis Suarez because it is "one of the most innovative companies on the planet."³

Those dreams are now dead. Last week's rapid collapse of FTX has erased fortunes and is fueling investigations as to where the money went. The giant FTX logo on Miami's waterfront is now an embarrassment, and is as doomed as they mayor's crypto vision for the city.

Suarez has loudly worked to diversify Miami's economy from real estate and money laundering to an emerging cryptocurrency and tech center. Early this year, he promoted a namesake MIamiCoin (which has since lost almost all its value)⁴. During the pandemic, he teamed with a Miami Beach based Uber billionaire to buy billboards in the San Francisco Bay area soliciting relocation to Miami.⁵ His pitch was that Miami had lower taxes and less regulation to get in the way of entrepreneurs.

But as can be predicted, this pitch disproportionately attracted the sketchiest of entrepreneurs. Run into a tech worker in Miami and you are likely to find they are associated with a cannabis or cryptocurrency startup. And it is not just Mayor Suarez who is courting these jokers -- the same is true for Miami Beach Mayor Dan Gelber, whose city hosted March's obnoxious convention of Bitcoin bros in a park next to city hall and gave opening remarks. In May, he blocked off part of South Beach cut the ribbon for a F1 racing-themed publicity stunt by now bankrupt FTX.⁶

Bad behavior by Miami bigwigs is hardly new. Miami has a long history of sleazy pitchmen fleecing outsiders. Florida is the state that gave the world the expression "selling swampland in Florida" as a euphemism for a swindle. Yet given all the real advantages that exist in the city, it's hard to understand why leaders won't try to attract more legitimate businesses instead of focussing on sketchy industries like crypto.

Of course, it's easy to mock an industry in the midst of a crash. With the benefit of hindsight, those who took risky bets and lost always look like fools. And such mockery can mask the value of truly valuable technologies. The same thing happened in 2000 when naysayers mocked doomed companies like Pets.com during the Dot Com crash. Meanwhile, Amazon, Apple and Google rose from the ashes to help lead the Fortune 500.

Can the same thing happen with the survivors of the cryptocurrency crash? There is theoretical value in neutral currencies free from the manipulation and inflationary behavior of governments. But the value of that freedom is meaningless in the face of volatility that can see fortunes reduced to a pittance overnight. The downfall of FTX was triggered by the collapse of its own FTT cryptocurrency from sales by a single individual. This demonstrates that cryptocurrencies (at least smaller ones) are similarly vulnerable to manipulation by individuals as fiat currencies are by governments. For cryptocurrencies to have any true benefit to the world, this must change.

The problem with the cryptocurrency industry is that it is unclear what can drive return on investments. A cryptocurrency itself (much like the U.S. Dollar and other fiat currency cousins) is a static store of value derided by Warren Buffet because it "doesn't produce anything."⁷ Those who "invest" in currencies themselves are not much different than those who invest in gold or beanie babies -- they are just gambling that some day somebody else will pay more for a static asset.

For companies that work with cryptocurrencies -- exchanges like FTX, Coinbase and Binance, long-term success means doing more than taking a cut from transactions as a middleman. Once the hype of crypto winds down (something that is already well underway) these companies will have to compete on the merits of revenues in competition with much better capitalized traditional finance companies. It is hard to imagine any achieving huge size and profitability in a manner similar to the surviving Dot Coms.

Those who bet big on FTX or FTT have seen their fortunes destroyed. But the same cannot be said for Mayor Suarez, who is apparently smart enough to know better. He filed financial disclosures in June showing he owns just $10,760 in cryptocurrency accounts compared to a total net worth of $1.3 million.⁸ Like those hawking swampland a century ago, the sharpest Florida hucksters always knew better than to believe their own hype.

Notes:

1. The Next Miami, Photos: New Logo Installed On Roof At FTX Arena, November 1, 2022

2. CoinDesk, Crypto Exchange FTX Is Moving Its US Headquarters From Chicago to Miami, September 27, 2022

3. Francis Suarez, Twitter post about FTX move, September 27, 2022

4. The Verge, MiamiCoin Crypto Lost 88 Percent of its Value in Less Than a Year, May 16, 2022

5. SFGate, Thinking of Leaving San Francisco? Miami's Mayor Put Up a Billboard Just for You, February 19, 2021

6. CBS News, 'FTX Off The Grid' Promises 3 Days Of Cars, Culture & Crypto On Miami Beach, May 6, 2022

7. Forbes, Warren Buffett Says Crytpo “Doesn’t Produce Anything”, May 4, 2022

8. Miami Herald, Francis Suarez Discloses Value of Cryptocurrency Investment, July 7, 2022