The collapse of the crypto Ponzi bubble: Wasn't Bitcoin supposed to prevent this?
The collapse of the crypto Ponzi bubble: Wasn't Bitcoin supposed to prevent this?
Well, no. The crypto bubble was fuelled by the legacy money printer. But at least there is no bailout. And we are seeing the Bitcoin bank run of 2022. Now we enter exciting and dangerous waters.
Hot takes. So. many. hot. takes.
The whole world is chiming in on the FTX/Alameda collapse and its devastating consequences for the crypto markets.
From Nassim Taleb, who sees the the cascading defaults within crypto as confirmation that he is, in fact, the most intelligent human being to walk the earth. (He is not.)
To Elon Musk, who revels in the fact that the whole story is playing out on Twitter and is covered by an army of "citizen journalists" while the mainstream press is still trying to paint SBF as some sort of saint who meant well or something. (Elon has a point here, I have to say.)
It turns out that the Bitcoin maxis where right again, just like the were right with Terra and Celsius. Their simple rules kept anyone safe who followed them.
- Bitcoin only (everything else is a scam)
- Take your coins off the exchanges (otherwise you run the risk of getting FTX'ed)
- Hold your own keys (basically Rule #2 but I really want to drive the point home)
Now, "save" is a relative term of course. Bitcoiners just want to keep their coins save as they consider them a small slice of the best money humanity has ever seen. But many normies just see a bubble collapsing - and Bitcoin at the heart of it. They see fiat value getting destroyed. And fiat value is all they know.
So they ask: "Wasn't Bitcoin supposed to prevent this?" Implying that Bitcoin isn't the great solution that it is touted as by the fans.
Is Bitcoin really to blame? And for what?
There is a chance here. A chance for half arsed Bitcoiners to finally understand the importance of self custody. A chance for crypto people to finally understand that Bitcoin is unique. A chance for regulators to finally understand that Bitcoin is different than “crypto”.
But in order to see these things, we need to dive a little deeper…
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Thank you, now back to the story…
Bitcoin was introduced in 2008 and started in 2009. Within the first block, Satoshi Nakamoto included the famous message/timestamp: "Chancellor on brink of second bailout for banks". The implied message: "This is bad. Bitcoin will fix this." And in a way, it has.
With Bitcoin being the reserve currency and the true collateral of the crypto markets, a real bailout of the now faltering companies is impossible. That's why the market gets to do its trick and purge the shit from the system at a truly impressive speed.
Come to think of it, it's no wonder mainstream financial journalists don't understand what is happening: they are waiting for a press release from the NY Fed that will never come.
But isn't Bitcoin also at fault for the crypto Ponzies getting spun up in the first place? This one is tricky. On a narrative level one could blame Bitcoin. Its original success was the story that the shitcoin promoters used to pump their own product - and many still do.
One could also argue that the Bitcoin maxi movement was too late and not toxic enough to prevent the truly amazing amount of scammers, grifters, fraudsters and conmen to rip people off.
But let’s take a closer look: doesn't the blame really fall onto the central planners who flushed the world with currency? Isn't the epic amount of monetary inflation the real reason for the bubble? Of course it is.
I see this as part of Bitcoins growing pains.
We like to say that we are still early (and we are)
We like to say that everything else is a scam (and it is)
Well, here we are. If everything else is a scam, it needs to falter before Bitcoin can rise from the ashes. If we are still early, chaos like this is to be expected.
The era of easy money is at an end. For now.
As long as the rates keep on rising, the crypto scams will fall - one after the other.
But while Bitcoin prices may still suffer, its adoption won’t.
Bitcoin bankrun: a lot of pain is still ahead
The Bitcoin maxi movement will emerge stronger than ever - and face new challenges. What we are seeing now is not just the collapse of FTX and many other crypto Ponzi shops.
It's the Bitcoin bankrun of 2022. People are dashing for the exits, grabbing as much of the real stuff as they can. Sure, Bitcoin gets sold too - but for every seller there is a buyer.
The chaos is not Bitcoins fault. Not the bubble, not its end. However, it will open a window for mean spirited (and scared) regulators to attack Bitcoin. Same goes for mean spirited (and scared) crypto grifters who survived this far.
What we might end up seeing is the "Gartner hype cycle” playing out.
The broad mainstream will dismiss crypto and Bitcoin with it - because they don't see the difference yet. But more and more individual people do see the value of Bitcoin and will continue to build and accumulate.
Tell me, how many Bitcoin-only firms have gone bankrupt so far? How many Bitcoin-only influencers have lost their reputation? How many Bitcoin-maxis have lost all their money? The answer is: zero.
But the Bitcoiners devotion will be put to the test now.
We know that the destruction of fiat currencies will commence. We know that the central planners have no choice but to inflate the money and control the people.
This is incredibly dangerous.
The more their system fails, the harsher they will attack the challenger.
This will be the Trough of Disillusionment.
This could be quick, it could be slow. Who knows?
But the real Slope of Enlightenment will come when the legacy system truly fails. When people will go into Bitcoin not because they want to but because they need to.
In some countries, this has already begun.
The Plateau of Productivity will only be reached once the “crypto” and the “legacy” bubbles are completely deflated and done.
And only then, when the governments money printer has forever been stopped, will we see, what Bitcoin can really do.
That's my hot take.
Love, Niko
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