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Stage 4 of bubble: India must miss the Crypto Bus.
Bitcoin is an interesting decade old technology, and the only legitimate use-case is holding crypto as a speculative risk-asset. It has fewer users than the no of use-cases.
Some of the billionaire Silicon Valley tech elites (fabled entrepreneurs, tech shamans, and venture capitalists) spend a quarter of their time tweeting recycled growth hacks + hackneyed Greek philosophy, a quarter complaining about erosion of civic amenities in San Francisco, a quarter congratulating each other, and the final quarter-time hustling, to create a fear-of-missing-out, intended to pump up their darling crypto investments.
Critics are labelled Luddites and promptly cancelled.
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Most of these tech elites buy the “initial coin offerings” priced in single-digit cents. These tech elites then use their over-powered Macs to send underpowered Tweets to share extracts from fuzzy “Crypto white papers”, relentlessly deploying psychological marketing tactics, expressing their wows at the potential of their darling crypto coin, all intended to disseminate a fear-of-missing-out amongst their followers. Finally, these tokens are listed on the casinos - FTX, Coinbase, and Binance, again partly funded by them. The followers of these tech elites buy the tokens, bringing in the necessary liquidity on these casinos for the tech elites to sell off their holdings, thereby continuing to amass wealth.
In the 1849 California Gold Rush, few prospectors struck it rich. It was the “shovel sellers” (and jeans, tents, pickaxes, and other supplies and services) to the prospectors who lived hard lives panning for gold.
The tech elites are the new shovel sellers.
CryptoCurrency is certainly interesting technology but outside of holding it as a speculative asset, even post a decade of existence, the no of users is fewer than the number of potential use-cases for crypto.
Crypto was never intended to be a speculative asset but meant to be a means of payment. Unfortunately, it has failed to become a viable form of money - it instead has become a highly volatile, speculative risk asset. Card schemes can handle tens of thousands of transactions per second while guzzling negligible energy, Bitcoin and its ilk are infinitely more unproductive and inefficient as a medium of exchange.
Crypto has failed to prove itself as an inflation hedge. As American inflation is rising, crypto prices are falling.
Decentralization is a myth, Tim O ‘Reilly who coined open-source and Web2.0 summarizes it succinctly: "Blockchain turned out to be the most rapid re-centralization of a decentralized technology that I've seen in my lifetime. It took a decade to re-centralize in the case of the PC. It took a decade in the case of the web. But it took only a couple years with bitcoin before the majority of the value was held by a very small group of people."
I think the biggest argument for Crypto is, that one day, someday, in the future, Cryptocurrency technology will find a fitting use-case, and until then let’s hoard it. Hoarding technology makes no sense. No one has ever profited from hoarding technology. The number of coins in a specific cryptocurrency may be finite, but the number of cryptocurrencies that can be issued, ad infinitum are infinite. How does one benefit from hoarding technology which can be replicated ad-infinitum?
The five steps in the lifecycle of any bubble (eg Tulips, Dotcom, or Crypto) are displacement, boom, euphoria, profit-taking, and panic. We are in stage four i.e. profit-taking by the tech shamans. It is not a question of whether Crypto will spectacularly collapse, it will collapse.
I worked for Citi in 2008 when India escaped unscathed from the Global Financial Crisis, if anything India's banking become stronger, while the global banking giants withered away. India’s hawkish RBI and its conservative policies saved the day for us. RBI has banned cryptocurrency in 2016 and has repeatedly and consistently issued warnings against the speculative nature of crypto, and hopefully, the damage will be limited when Crypto crashes.
Unfortunately, India has a rich tradition of successful multi-million, multi-level marketing ponzi scams, crypto is like adding nuclear fuel to these multi-level scams. Despite the warnings, people continue to invest in Crypto.
We Indians want bailouts when banks, real estate developers, and their ilk go bust. Hopefully, the taxpayers don’t have to bail out the crypto boomers, when this bursts.
Reminds me of one of the alleged conspirators said of the purported $722 multilevel crypto marketing scheme, BitClub network who said, "We are building this whole model on the backs of idiots,"
What’s even more worrying is that paradoxically Indian crypto boomers are likely staunch nationalists, but want a currency that is founded on the principles of anarcho-capitalism.
Warren Buffet's long-time partner, author of the out-of-print best seller, Poor Charlie's Almanack, 98-year-old Charlie Munger in 2022, likened Cryptocurrency to venereal disease.
Munger is right.
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