Josh Barro explains the FTX collapse in simple terms:
[T]his is not a technology story, because FTX was not a technology company. Sure, FTX’s business relied on technology, but so do most businesses. FTX has an app; so does Fidelity, and so does Chipotle, and that doesn’t make them tech companies. FTX was a brokerage, and there were two things that set them apart from a regular brokerage. One is that they dealt principally in nonsense financial products with no underlying economic value, and the other is that the owners either lost or stole the customers’ money and then lied about their resulting insolvency.
Because cryptocurrency assets have no fundamental economic value — unlike stocks and bonds, they do not reflect a claim on the cash flows of some business creating real value in the economy — there can be no such thing as fundamentals-based investing in them. When people invest in crypto, they out themselves as marks for scammers who might believe any nonsense about what something is worth. And therefore it’s the least surprising thing in the world that someone would open up a crypto exchange, offer implausible interest rate terms in order to hoover up billions in customer deposits from the gullible masses, and then misappropriate the proceeds.
He also provides some rules of thumb for dealing with cryptocurrencies, the first being, "any crypto-related business is a scam." Quite so.