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Crypto: Everyone Was Just That Stupid
$2.1 trillion.
That's a rough approximation of the total value destruction across the cryptocurrency space from the peak seen in early November 2021 through Tuesday morning, when Bitcoin sat at a two-year low, and endorsement payments to Tom Brady from FTX were being scrutinized by Texas regulators.
Who could've known, just 12 months ago, that things would turn out this way for crypto? After all, the private money business sounded even more compelling this go-around than it has in the past.
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Best article of 2022.
I think you hit the nail on the head. “Web3” proponents were essentially dreaming of a world where (essentially) someone could use their J Crew points and trade them for, I don’t know, Exxon points. In this new world, if I wanted to save a couple of bucks on gas, and had some J Crew points I didn’t care about that someone else wanted, and I found this person, sure I suppose that’s “useful”.
But the practicality of such a situation is farcical. If I truly cared about saving a couple of bucks, I’d not be writing this comment and instead be traversing the web looking for a CODE I could enter into some checkout form.
I recall my former barista friend dreaming about holding a web conference on zoom and turning it into some bizarre competition where people could earn crypto from other participants based on what they were doing on the conference call.
Apologies for my previous comment where I restated a portion of your article in poor form.
Sounds like an economy based on accumulating and trading gift card balances.
I did not like this article, I loved it. Before you outed yourself about your crypto journey, I was wondering to some degree, whether you had become an adherent.
This morning before I read this article the thought passed my head to see if I couldn’t find out how much bitcoin keys had been lost. Somewhere between 10 or 25% so bitcoin will probably not go to zero very easily.
Broken record time.
Pyramid scheme, dressed in the Emperor’s new clothes.
So a bitcoin and a dollar walk into a bar.,..,,.
PS if a lot of that cash had gone to gold the Goldbugs would’ve ruled the day, messy.
If even a fraction of the money went to gold, the gold bugs would have ruled the day,
Ontario Teachers Pension investing in crypto instead of bluechip gold miners and royalty streamers paying nice dividends. Interesting older article about gold if you have 28 minutes….
Thanks very much for the link. A very entertaining talk.
As you might infer from my ID, I take an interest in gold, and precisely for the same reason that Mr. Williams identifies at the end of his presentation. Insurance.
The 300% gain in bullion since 2008 is purely incidental, and remains variable.
To add further support to your logos, I wonder if the “free” transfer between various cryptos by a single owner or even just the transfer of a single crypto between two different owners actually exists? Or if it is much the same as with airline miles- where the transaction costs take most of the economic benefit from any transfer.
If you (which H might not be personally aware of because he has previously disclosed to us readers that he prefers not to fly in an airplane) have ever had airline miles that you wanted to transfer to another person or credit card “universal” points that you want to exchange for an actual airline seat, the transaction fees will almost make it such that it would be more economical to just straight up buy an economy seat with USD.
My wife and I spent the first couple years of 1970 in the St Louis area. All kinds of merchants from department stores, to supermarkets, to gas stations, all sorts of places, in fact everyone it seemed, gave out a brand of trading stamps for every purchase (forget the name). The beauty was than unlike green stamps one could redeem the stamps to buy anything from any merchant who gave them out The exchange rate was one book = $3 bucks. If I needed gas I’d fill the tank and hand over the required books. I’ve still got all kinds of stuff I bought with these stamps. They were the best because in the greater metro area they were just about universally valuable. Crypto only matters in dollars and you never know just how many. Someone out there still has some $66,000 bitcoin, the poor sucker.
S&H Green Stamps?
I remember the S&H Idea Book!
My mom always wanted china or glasses and my brother and I wanted sports equipment!
Indeed! A source of intra-family strife.
Wasn’t there a competing stamp program as well? Vague memory is they were some kind of orange color?
FWIW, in Germany and in other countries during and after WWI, banks, municipalities, businesses churches, sports clubs, governments, etc. printed “Notgeld” , or “emergency money”.
Some of it was rather creative, with scenes from German history, or money that could be redeemed for one paving brick at the local construction yard, etc.. Some had political commentary, some circulated quite widely.
Very nice article. How are equities different?
They aren’t, except most don’t go all the way to zero, and you have a chance to get your money back on the survivors if you’re young enough (I’m ancient so just standing clear).
Equities are an ownership share of an operating company, which has assets, revenue, profits, cashflow (or not, but then that’s the investor’s choice). The company can do well or poorly, and it’s stock price can be very volatile, but absent BK or delisting prices seldom go to zero. The investor can analyze and value the company on some rational basis (or not, but again that would be the investor’s choice). The ownership share produces dividends (or not, but – you know).
Yeah there’s obviously no comparison here to equities.
No comparison as in equities aren’t private money? Or no comparison as in equities are a better private money?
No comparison as in what you’re saying doesn’t make a lot of sense. Equities are a claim on dollar- (or euro- or yen- or etc.) denominated profits and cashflows, and companies typically have “stuff” that can be sold for real money (e.g., buildings, inventory, equipment and so on). I don’t think you’re being 100% serious here (or at least I hope you’re not), and even if you are, the commenter above answered your question concisely, so I’m not going to entertain it any further. If you truly don’t believe there’s a distinction, then you’re free (for now anyway) to cash in a portion of your S&P 500 investments and put the proceeds in a basket of cryptocurrencies or pay someone with a lot of frequent flyer miles to transfer them to you (assuming that’s possible and you like to travel by sky bus).
The company ‘issues’ private money. Sometimes to it’s own employees as payment for labor. In that sense it’s not much different from frequent flyer miles. Your frequent flier miles won’t go to ‘0’ unless the company goes bankrupt either.
now you’re just being dense on purpose … but if not, try trading your frequent flier miles on an open exchange with anyone, any where, at nanosecond speed for actual currency (of any kind) and see how that might work out
The frequent flyer point is simply an attempt to jive with content delivered in the article regarding a broad definition of private money.
Very different. Equities are (in theory) a positive sum game and are intended to generate positive cash flow as a result of operations.
Crypto is a zero sum game that generates no cash other than what is put in.
I opened the Fidelity app on my iPhone this morning and a pop up asked me if I was ready to purchase cryptocurrency. I hit the “No Thanks” button.
In the first quarter of this year I almost bought into the hype. So many people making millions or billions. I thought the only way this alternate currency made sense was for drug and crime enterprises. But then I read stories of drug dealers getting caught and the FBI figuring out how to get into the blockchain and them having all the records of all the transactions.
Then the H man came out with articles talking about his foray into and out of it , I knew then I dodged a bullet.
H_Man. just a case of complex, opaque tulip bulbs for the masses.
Many people don’t understand that the only way real, spendable (publicly and universally accepted) money is created is 1) Through an act of congress in which the Treasury funds spending into the real economy and 2) A regulated bank creates a loan and deposits it into someones account to spend. (The Fed doesn’t spend money directly into the economy–it is just an asset swap (e.g. Bank Reserves for Treasuries). As Heisenberg eloquently lays it out, all of this other “private money” is nonsense. Some of these shady crypto exchanges were minting crypto coins (private money with no real collateral) and then exchanging it for public money through very convoluted transactions. This, needless to say, is fraud.
I remember green shield stamps. Towards the end you needed 8000 stamps in 12 books to buy a pint of milk. More recently, Groupon, buy a voucher for discounted dog grooming, northern lights in August, return flight to wherever you want to go via Kabul – all useless cr@p. If the sales patter ends in “you just don’t get it”, it’s time to close the curtains, read one of Plato’s dialogues with a nice bottle of Chateauneuf du pape 2010
Funny how free money breeds the dumbest business ideas (Crypto, Theranos, MBS derivatives). What’s bizarre is that there is always mainstream institutional investment that feeds it and winds up with an embarrassment of losses.