Crypto is Aging Like Milk, Now What’s Next?
Bernie Madoff would be proud
The next Warren Buffett:
Cathie Wood … nope Vlad Tenev … nope Chamath Palihapitiya … nope Sam Bankman-Fried … nope
False idols. Golden calves. All of them.
Every single one of them were investing superstars only a year ago. They were hailed as geniuses, oracles, and visionaries. And now? They’re all washed up. Done. Bankrupt like a Lehman Brothers bond trader.
The worst, however, is FTX CEO Sam Bankman-Fried who — due to overleveraging user funds that were supposed to be back 1:1 on his exchange — filed for bankruptcy this week potentially destroying 130 other companies (including BlockFi?) and celebrity careers in the process.
Jesus tap dancing Christ, what a mess.
Do you understand the implications of this?
Crypto just erased years of progress. Poof. Gone.
Tom Brady. Stephen Curry. Shaq. Dozens of high-profile celebrities, politicians, and institutions were connected to FTX and now all their money is gone along with their faith in crypto.
This is a disaster.
I’m not afraid. I’m not nonplussed (is that what that word means?).
I’m just waiting for the next shoe to drop.
And it will. Here’s what happens next.
Crypto Just Set Itself Back Years
“The altruistic thing to do is to take chances. Seek out the opportunities with the biggest upside, not the ones which are safest” — Sam Bankman-Fried
SBF’s FTX crypto exchange was supposed to be one of the good ones.
They own(ed) a stadium in Miami. They were valued at $32 billion. They promised that user’s funds were backed 1:1.
Lies. All slimy, stinking corporate lies.
On Thursday $6 billion was liquidated from FTX in 72 hours all because funds weren’t stored safely offline like they were supposed to be. They were instead being invested to make more money for the already super-rich.
I’m not at all nonplussed by this (there goes that word again).
FTX CEO Sam Bankman-Fried got his start as a Bitcoin arbitrage trader.
That means he was making money by taking advantage of the price differences of Bitcoin on different exchanges. He was gaming the system. He’s not in crypto for the fundamentals. He’s not in it to build a transparent financial system that works for everyone. He was in the industry to make a quick buck and build a house of cards propped up by young money, hot air, and over-leveraged margin calls.
Are you angry?
I am.
I am angry because millions of users on FTX are losing their funds, jobs, and livelihoods.
I am angry because this is going to set the crypto industry back years. I am angry because we were so close to institutional adoption. So close to becoming the new standard and seeing a semblance of DeFi in the mainstream.
And now? Now we’re the butt of jokes, memes, bloggers and late-night talk show hosts. And rightfully so.
This is turning into a Red Wedding like no one could have predicted.
Thanks. For. Playing.
Crypto will be Legislated like a Weapon
Binance CEO Changpeng Zhao could have bailed out FTX.
He didn’t.
I’m glad.
Crypto is becoming exactly like the Trad-Fi system it’s trying to overthrow:
- Make lofty ROI promises to your investors
- Invest wildly with their funds like its monopoly money
- Dump your losses on the little guy when it all comes crashing down
- Have a central bank (or authority) bail you out
- Rinse and repeat.
You have to cut weeds at the root if you want to kill them.
FTX was a weed. A big, ugly, poisonous weed.
The ironic part is decentralized finance solves all of this. Decentralized exchanges like Uniswap will never go bankrupt. Why? Because their balance sheet is transparent, and on the Ethereum blockchain.
You can’t default on math. You can’t steal from code.
The solution is staring us right in the face but, like lemmings, we’re running towards centralized exchanges and the exact tyrannical systems we’re trying to escape.
What a mad world.
I can’t put too much blame on the people. DeFi is still too complicated for the average person. It’s why this week was a bucket of cold water in the face for many in the crypto industry.
We have to make this technology easy to use if we want everyday people to benefit from it. And if you’re not a developer we need to support DeFi.
Projects like:
- Metamask
- Uniswap
- PancakeSwap
- SushiSwap
Man oh man, do we have a long way to go.
Is There a Silver Lining?
Yes. No more hype.
No more greed.
Anytime an ostentatious, opulent leader in crypto rises like a Sam Bankman-Fried, a Cathie Wood, a Chamath Palihapitiya, or “THE NEXT WARREN BUFFETT” we should all be highly skeptical.
These are people who are not in it for the right reasons.
They’re milking the spotlight like a boy band desperate for 15 minutes of fame.
This is unlike Vitalik Buterin, Nick Szabo, Michael Saylor, or even Jack Dorsey who have stayed relatively demure and let their work speak for itself.
Though, at this point, we can all agree it's time to stop putting our trust in pundits and focus on the decentralized protocols that will shape the future.
I never recommended investing through FTX to my readers, but I once wrote an article about Cathie Wood and recommended BlockFi as a place to earn on your crypto for beginner investors.
For that, I’m deeply sorry.
We need more humility, honesty, and transparency in this industry.
Fourth, and finally, many Bitcoin miners are now turning their rigs off.
Bitcoin’s electrical cost has just been breached for the 2nd time only in 5 years. Moreover, the Bitcoin “Rainbow Chart” is as broken as a $2 watch from an NYC Street vendor. These are both strong indications that the market is about to take a turn for the worse…
The silver lining — yes, there is one — is that hard times will make crypto stronger; but my God, it will take time and an immense effort from the investors and developers who still believe in blockchain.
I still do and I’m still all-in, but we need to build off the core philosophy that Bitcoin and Eth were founded on: decentralization and transparency.
If we don’t we’re only making a digital version of the draconian Trad-Fi system we all hate… just with a few extra steps.
That’s not why I’m in this. Let’s get back to our roots.
Wanted to take a longer break from writing, but this week was f — ing crazy. Election update coming tomorrow. I’ve patched things up with Medium, and, ostensibly, will be here blogging for a long time; however, putting out some of my best work over on my Substack. Check it out!
Join 2500+ people on my Substack for a copy of my new eBook “Gold2.0.”
Ever since I was a child it was my dream to become a financial advisor. Unfortunately, it never came true. Therefore I am not a financial advisor and you should do your own research and not just listen to random people on the internet. Nothing contained in this publication should be construed as investment advice.