A Ponzi Economy for The People
When I saw this headline I couldn't help but think that this is exactly how a speculative bubble behaves.
Price manipulation plays as much or more of a role than demand in driving prices higher.
This isn’t some big secret. In a widely circulated 2017 paper, researchers attributed over half of the then-recent rise in Bitcoin’s price to purchases made by a single entity on Bitfinex, a cryptocurrency exchange headquartered in Hong Kong and registered in the Virgin Islands.
Critically, these purchases were not made with dollars, but with Tether, another type of cryptocurrency known as a “stablecoin” because its price is pegged to the dollar so that one tether is always worth one dollar... There are now over 78 billion tethers in circulation and rising, about 95 percent of which was issued since the latest cryptocurrency bull market started in early 2020.
Einstein once said “Two things are infinite: the universe and human stupidity; and I’m not sure about the universe”. Thanks to Bitcoin you can now invest in Einstein’s thesis.
At least that's the case for anyone looking to get rich investing in cryptocurrencies, or believing that Bitcoin is a real currency.
If, on the other hand, you accept that this is just gambling in a rigged casino, then perhaps you really do understand the situation.
This new class of scam diverges from that classical Ponzi in a significant and legally important way. Instead of the smoke-filled rooms we have the haze of post-truth obscurantism induced by our new media landscape that feeds on illusion, distrust in experts and confusion as a means to obscure the underlying mechanism of the wealth redistribution scheme.
It took me some time to realize, but investing/gambling in cryptocurrencies isn't all that different from investing/gambling elsewhere in the economy.
Insider trading is everywhere in the stock market. Interestingly 56% of people who have money in stocks think the market is rigged against individual investor.
Yet only 41% of people that aren't invested in the stock market think that it's rigged.
Obviously the investors are more informed than non-investors, and still they are investing. So are they stupid for betting in a rigged casino, or do they know exactly what they are doing?
Bank of America declared in 2020 that all of the Central Bank interventions were creating “fake markets.”
Never before has the economy seemed more fake than it did in 2021.
Then again, everything about money feels a little strange at the moment. Between NFTs, crypto, and GameStop, AMC, and other meme stocks, money has rarely felt more fake. Or, at the very least, value has rarely felt so disconnected from reality.
NFT make absolutely no sense on any level of reality, except on a purely speculative gambling level. Meme stocks like Gamestop was an interesting story, but did you know that people are still buying and holding it?
Before you criticize Millennials and Gen-Z for speculating on these worthless, uh is "assets" the right word for these things? Consider that we didn't arrive at this point out of the blue.
The scenario has generated quite a bit of finger-wagging from Very Serious People who say what’s going on is beyond the pale, that investing is supposed to be about underlying value and the real, tangible worth of a thing. NFTs and Shiba Inu coin, they say, are clearly fake. At the same time, so is so much of what’s going on in finance and the economy already — including the spaces the Very Serious People occupy.
During the 2008 financial crisis, for example, exotic financial instruments created out of subprime mortgages among Wall Street and banks helped take the economy down. They also revealed regulators to be asleep at the wheel. Very recent history makes it hard to take the Very Serious People in finance and government seriously as responsible stewards of the global economy. The financial industry has gone to great lengths to create new financial products with the potential to do more harm than good in the name of making more money.
“To have a boomer burn down the planet and then have them wag a finger that crypto’s bad for the environment? Please, that’s absurd,” Dash said.
Cryptocurrencies and NFT's are clearly scams in which most of the people investing in them will lose their money.
However, the stock market has also clearly become a scam in which the retail investor will obviously be scammed out of their money.
The only real difference is that regular people can afford to gamble in cryptocurrencies and NFT's. The only reason why the stock market is treated as more respectable is because that's where the wealthy gamble.