Why there will be Crypto crash - and why its exactly what we need
In another life time I was a Futures Trader for a U.S Investment back - Bankers Trust. we were a swashbuckling, go get em, hard trading bank. Nothing mattered but making profit from trading, they didn’t care about your process, so long as it made money - and I loved it - and as the book about BT said it was ‘One of a Kind’.
BT made its reputation by going short in the 87 market crash and I worked with some of the smartest, most switched on and genuine people i’ve ever worked with. Eventually we were bought by Deutsche Bank and although I hadnt realised it at the time, those swachbuckling days of trading were petty much over.
I also lived through the the tech boom and bust - the ‘dot.com bubble’ - and advised our clients to go short, the institutions did, the retail investors didn’t. And what we are seeing at the momment in crypto is exactly the same - and its about to crash.
And as happened in the Dot com bubble, the vast majority of retail crypto investors will lose everything
We are entering the period where Crypto is about to be ‘found out’, as we go into a higher rate environment, and easy money backs off, the crash in crypto will happen - and its a good thing. But why do I say this? As a believer in Web 3.0 Blockchain and the Metaverse am I not contradicting myself ? Far from it.
Here are my reasons
1) Crypto is NOT a currency, It is a contract with rights attached to it: Yes you need those contracts to receive certain things but it is not liquid method of easy value exchange. In fact there is nothing easy about it. Tokens have rights, but that doesn’t make them currencies.
2) If the rights attached to the token are worthless, then the token is worthless: You can’t escape gravity. If there are no valuable rights attached to a contract (Token) then the token as no value.
3) Its not and never will be Fiat as it isn’t backed by anything: Fiat is backed by government tax receipts, crypto is not. When people say its ‘backed by an algorithm’ then what they are saying makes no sense as a fiat argument. All the ‘algorithm’ does is update a ledger (the blockchain) to show who owns what token - its not ‘backing’ anything.
You believe in the medium of exchange of Fiat because its backed income Gov Tax receipts. Now if there was Token that was backed by gov tax receipts, and it didn’t involve gas fees, and it didn’t take ages to update the blockchain THEN we could compare - but it doesn’t, and it won’t, so we can’t.
4) If the business behind the token is worthless, so is the token: When I was advising everyone to go short the tech boom and advising all my mates to sell all their tech stocks before the tech bubble, I remember a very smart guy at Bankers Trust that saying I simply didnt understand the tech businesses I was selling short. I asked him to explain them - he couldn’t. It’s the same in Crypto now. If you don’t understand what the business does that the tokens support then don’t buy it.
The way Tik Tok ‘crypto investors’ talk about the tokens they pimp is ludicrous. They have no understanding of the business underlining it, they talk about technical trading terms but have no skill, it takes years to be a good trader, they are scammers taking your money.
When the crash happens they will disappear - as will all of their investors money .
However, Blockchain and Crypto will be the future:
No im not contradicting myself here. The tech behind Web 3.0 etc will dominate the future, and there will be winners, and just like the tech boom, although 99% of the companies disappeared, the 5 biggest compnaies in the world came out of the tech crash, it will be the same here.
Tech like Etherium and good businesses where the tokens have valuable rights attached will thrive, but the crash will happen first, with is a good thing as it will clear the decks of all the rubbish, get rid of the Tik Tok investor advisor fools and help us get on with building a solid Web 3.0 world.
Dudley Nevill-Spencer