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About the author: Ian Chaffee is a technology and startup consultant for media relations based in Los Angeles.
Crypto has failed the moment we needed it most. Bitcoin is down 70% from record highs. Ether is more down. The lending network Celsius has suspended withdrawals.
This is not quite the doomsday that crypto’s biggest Pollyanna fears, or the one its biggest critics might like. It’s something else. Crypto has entered a new era of “set up or shut up.” It can prove welcome.
At one time, boom-bust cycles seemed to be programmed into Bitcoin and other cryptocurrencies, along with cryptographic proof-of-work and a limited offering. They were a function, not a mistake, that allowed “whales”, large financial institutions and experienced retail investors to “buy dip” and wait for their speculative investment to become a five-bagger, a ten-bagger, or even a thousand-bagger. bagger. Investors who have been in crypto’s almost 15-year history can easily drown out the noise and see these “crashes” for what they really were: buying opportunities.
Out would come the inevitable stories in the media that proclaimed “The Bitcoin End Is Near,” Crypto-haters would use the ultimate joy of harm performance platform that is Twitter to forward these stories and dunk on crypto-naive. Robinhoods and other random retail investors would be intimidated and paid at a low price, some price, to long-term buyers. Foam, rinse, repeat. People who call crypto a Ponzi scheme fail to realize how crypto trading has actually worked in the last decade. In a Ponzi scheme, someone buys in and then stays with the bag. Within crypto, knowledgeable investors continued to buy the bag back (between Lambo purchases).
This year there has been a unique hype in the form of Super Bowl crypto commercials from LeBron James and Larry David (whose natural skepticism about everything innovative looks quite foresighted). We are now met with RD & D to like the hype. It had to happen, a logarithmic hype cycle where ever higher altitudes create ever greater falls and fails every time, along with a market that is more flying than your average crypto-influencer’s Twitter icon (from laser eyes to the cartoon NFT de just bought for the art that best represents our new season of tightening “HODLing”).
But this time we can actually meet something new. Even whales run scared in this cycle, pressured to sell in the name of the debt service. One such whale recently sold tens of millions in Ethereum, crashing its price by 20%, apparently to pay off debt related to a DeFi loan. As Herman Melville once wrote, “There is a mutual world of stock, in all meridians.” While the most ardent crypto-enthusiasts may think they are living in the year 3001, they are as stuck as the rest of us with the economic problems of 2022, and the worst inflation in 40 years.
Fresh on a unique use of money by governments to keep people afloat during the darkest days of Covid, along with a host of other factors, we finally have the perfect inflation storm, one that was almost inevitable after the “money writer goes brrr” meme of the early pandemic. Yet, despite the warning signs being so clear that they were memed, crypto has done nothing to protect against inflation, while continuing to knock on its chest and somehow promises to be the last store of value.
The crypto prices have collapsed almost in line with the stock market. Not even attached stack coins, which had promised relative stability, are immune. Far from a safe haven and hedging against inflation, crypto is the only thing that has ever been so far, just one popular, overheated place to park their money. It should take a break when the most “innovative” and profitable companies emerging from an industry are stock exchanges and marketplaces, many of which experience service interruptions, often during the most severe market crashes. We are finally seeing the kind of inflation that was the biggest nightmare of someone like Satoshi Nakamoto, a state we should be awakened from by a more perfect digital currency. So far, crypto has proven to be the dream, or at least a shared hallucination.
Maybe better days are just over the horizon. After technology crashed in the early 2000s, and economies plunged into an ever-deepening hole during the financial crisis of the late 2000s, Apple launched a small device that changed the structure of society while helping to increase the Dow Jones Industrial Average by five times and Nasdaq by eight times. Blockchain and cryptocurrencies have the same opportunity. But it will take a renewed emphasis on innovation and an emigration of fly-by-nighters (or bored-by-apers).
What is bad for speculators and cryptocurrencies may eventually prove to be crucial for the next generation of crypto innovators.
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