Opinion Why the crypto bubble has finally imploded

cigaretteman

HR King
May 29, 2001
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Adam Lashinsky is a former executive editor at Fortune magazine and the author of “Inside Apple: How America’s Most Admired — and Secretive — Company Really Works.”
The bursting of the cryptocurrency bubble will end the way other speculative crazes have concluded: in a trail of wreckage across companies, continents — and unlucky investors. Crypto has had a horrible year. We saw the terra “stablecoin” wipeout in May, the unraveling of the FTX trading exchange this week and the shriveling of trading in non-fungible tokens all year long.


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Small-time investors already have fled, their grubstakes or life savings decimated. Well-heeled venture capitalists, badly burned by each successive bust-up, will wash their hands and move on to the next shiny object. The side-hustling crypto-ambassadors (insert any big name from professional sports here, please) will slip back backstage. And regulators, as is their wont, will finally issue their overdue rules, long after the damage is done.



There’s a critical difference with crypto, though, compared with past bubbles: It had virtually no intrinsic merit.
Before and after their bubble burst in the mid-1600s, tulips were still pretty flowers. American railroads begot massive (and positive) change well before the Panic of 1873 and are still vital almost 150 years later. The promise of email in the 1990s — and its dot-com derivatives — was real and epochal. Even badly abused subprime mortgages were a lamentable innovation on hard-to-get loans for home purchasers — a market that survived the financial crisis of 2008.
“Crypto,” a still poorly understood catchall phrase for digital currencies and other securities not controlled by a government, won’t be able to make the same claim. Crypto was supposed to be a haven in inflationary times, the way hard-metal commodities such as gold often are. Yet confections like bitcoin and ethereum have plummeted as inflation has skyrocketed. They promised a way to store value. Clearly, they do not.



More egregiously, crypto was supposed to have all sorts of other uses, from easy cross-border remittance to pegging a value for newly created forms of digital art. None of this has come true at any scale worth bragging about.
In our system, entrepreneurs, and the investors who back them, provide a valuable service by taking risks on unproven ideas. Without them, we wouldn’t have Apple or Google — or Post-it notes. But we now know the crop of swaggering financiers who dreamed up the new category of investments casually known as web3 have been kidding themselves.
A common justification for these investments has been that they captured the fascination of software coders and entrepreneurs, leading to the dreamy conclusion that a real market for digital assets of all kinds was emerging.

What emerged instead is another example of one of the worst ills that afflicts Sand Hill Road, the heart of Silicon Valley’s venture-capital industry: confirmation bias. The enthusiasm the VCs mistook for an investment thesis was often just the result of too much cash chasing too few truly good ideas.






Nerds aren’t stupid: If someone offers them oodles of money to chase a fad, they’ll start coding. Hence, crypto.
The past 15 years or so of venture-capital investing can be in many ways explained by the low-interest-rate environment in which it exploded. With endowments and pension funds (and many an ordinary multimillionaire) unable to earn safe returns in bonds for more than a decade, their money managers opted instead to place riskier bets.

Consider the Ontario Teachers’ Pension Plan, Canada’s third-largest. Three years ago, it set up a special fund to make venture-capital-stage investments. It invested $95 million in FTX, a leading crypto trading platform. On Thursday, it noted that “not all of the investments in this early-stage asset class perform to expectations.” It added that its FTX investment — presumably none of which it will ever see again — represents a tiny percentage of overall investments.


For years now, the folly of such investment strategies translated, essentially, into free money for entrepreneurs. It didn’t take a genius to spin up a company when the cost of capital was next to zero.
Now, that era is over. Higher interest rates will allow pension funds such as the one in Ontario to seek safer investments. As a result, the flow of funds to VCs and start-ups will slow. Only the best companies and VCs will emerge on the other side.

 

THE_DEVIL

HR King
Aug 16, 2005
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Hell, Michigan
www.livecoinwatch.com
The blame goes to both dems and republicans in the fed government who have let the incestuous old boys network in the financial arena do the same thing they did in the mortgage fiasco a while back:Don’t be fooled by new young names you hear right now,
The lack of ANY coherent or for that matter really any regulation for the industry at all is a travesty.

JFC I am sounding like a conspiracy theorist aren’t I.
 
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bunsen82

HR MVP
May 6, 2004
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Look I could be wrong, I think this thesis is completely wrong. I think Bitcoin, ethereum and handful of others will be long term assets.

1. Assets like bitcoin were not created out of thin air. They were mined which took equipment and energy. Now you can state the bitcoin itself had no value prior, it is no different than a shirt or a piece of paper or a dollar bill. It has no value until attribute a value to it. Bitcoin is also finite. No more can be created like dollars from the federal government.

2. What you will see is a purge of the smaller coins (that are not decentralized and held by a few entities or people) and businesses that had no history. The weak go to the wayside and the strong survive and get stronger.
3. Unlike tulips or other crazes that lasted a year or two, we are now going on almost 14 years since bitcoin and crypto currencies were created.

4. There is more financial investment even now going on in crypto than ever before. Yes maybe it falls by the wayside, it could, the price may also continue to plummet, but I have seen 2 separate reports from financial equity firms that says bitcoin is undervalued at $15k, and that is the price they want to start to get involved.

5. The younger generation continues to use these coins for payment use and other. It is no different to them than using a credit card or a dollar bill. In some cases they can more understand the volatility and massive movement in prices than older generations.

6. More regulation will bring cryptocurrencies further into the mainstream with more guidelines and proper financial stewardship and less of the wild wild west mentality.

It becomes easy to say something is a fad. However, what is different in this 4 year cycle than the 2 previous downward cycles in bitcoin - up to this point absolutely nothing. Maybe this time will be different than the previous 2 cycles where people said bitcoin was dead . . . or this is near to another bottom and within 2 to 2 /2 years it will be near 90k.
 
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