When Satoshi Nakamoto published the Bitcoin whitepaper, in late 2008, the world was in turmoil as a result of an economic and financial breakdown. Financial markets deviated so much from the real world with the so-called investors only interested in accumulating wealth, that the Ponzi scheme collapsed under its own weight.
Only 11 years after those events and, unfortunately, the world hasn’t learned a thing. Not only that those same investors resurrected the Ponzi scheme from its own ashes, but they actually drove it to higher grounds in the second decade of the third millennium.
The stock market still remains a big part of the scheme as critical thinker Tan Liu plainly puts it in his book ‘The Ponzi Factor: The Simple Truth About Investment Products’ and in one of Chris Martenson’s ‘Peak Prosperity’ podcasts.
The Stock Market Today
Liu groups stocks into those that pay dividends and those that don’t. There is nothing fundamentally wrong with the stocks that pay dividends, although quite a few in numbers as the companies issuing them elect to maintain at least a monetary connection with the investors.
The stocks that don’t pay dividends are the real problem. Since the only way to make a profit from such assets is through capital gains, the scheme quickly reveals itself as adopting ‘the bigger fool’ principle. In other words, the profit of an early investor comes from another investor who bought in later, at a higher price. The stocks you own don’t make you an owner of a particular company anymore, therefore, they have only speculative value: the only foreseeable way to make money is selling them at a higher price compared to the initial buying price. If you can’t sell them at a higher price, you will have a net loss that will only get worse if the system isn’t properly fed and new money stops coming in.
An Honest Look At The Cryptocurrency Market
The cryptocurrency market isn’t much different at all.
Cryptocurrencies don’t give you any voting rights (at least, the traditional ones; there are tokens like Tezos who brag with their on-chain governance system) and certainly don’t give you any dividends. There have been some projects that promised investors some sort of returns but they quickly gave up at that notion not to be labeled as securities.
Like stocks, the whole idea of a cryptocurrency is based on a future assumption, on a future value. For example, the crypto community believes Bitcoin will be the money of the future (even though many Bitcoin maximalists shill the store-of-value proposition, after BTC more or less failed as a widely-used means of exchange). This means everyone is speculating now on a future utility whether it is digital gold or new money. Thus, the BTC investor sells the idea that it might be useful at some point, in the future, while pretty much ignoring the present or the past, just like a genuine stock investor.
Moreover, the same rules apply when one calculates a stock market cap compared to a cryptocurrency market cap, a fictitious and insane statistic as Tan Liu explains in the podcast. The market cap is simply the total supply of the coins in circulation plus the last price the coin was traded at. That makes the number very volatile with billions of dollars vanished into thin air or added up in a matter of minutes. Obviously, those billions don’t have anything to do with reality, it’s a purely fabricated fact.
What About Scarcity & Sovereignty?
Many Bitcoin Maximalists today argue the top cryptocurrency is very different from the central banks’ printing press or the companies’ print-at-all stock policy. Bitcoin is scarce as there would only be only 21 million coins ‘in existence.’ In fact, this might be their only valid point, but they also conveniently forget about the ‘shady splits’ BTC has suffered, especially during the 2017 hype.
Just like Google and its shady splits of A to C shares, Bitcoin had several dubious hard forks, including a very close call with Segwit2x that could have basically ruined Nakamoto’s creation.
What some have learned with these hard forks is that human beings, in their attempt to get rich quick, will always find a way to game the system and make it their own, no matter the immutable hard code.
What about sovereignty? Really owning & controlling your coins must have some value, right? Indeed, it has as much value as owning paper stocks. No matter if you own the private keys of your coins or you don’t, the coins are worthless nonetheless if you can’t sell them. To have value, you must first find a market – cryptocurrency exchanges, over-the-counter (OTC) markets and then, the bigger fool. What happens if you can’t find the market? Or the bigger fool for that matter?
Cryptocurrencies As Financial Derivatives
In his introduction to his podcast, Chris Martenson spoke briefly about the current “markets.” About how non-economic players gather to influence price to reflect certain conditions. About greedy whales ready to ‘smash’ the price upwards or downwards, depending on their positions.
Stocks, today’s paper commodities market, and yes, cryptocurrency market fully reflect that truth. It is unknown when it started – maybe late in 2016, or maybe earlier, with Mt. Gox – but the cryptocurrency market has fully transformed into a financial derivative market. Big greedy whales control the zero-sum game by design (negative-sum in reality) by pumping & dumping at will.
Millennials were and still are the easiest prey since they are almost addicted to technology and hardly understand their parents, the baby boomers, with their stocks.
They apparently understand Bitcoin & cryptocurrencies though, so all the whales have to do is keep them locked in a state of conscious dreaming while they made the necessary adjustments for the market to behave & react just like other “markets,” including the hard-to-understand stocks.
It may superficially be about sovereignty, freedom, and F**k The System, yet, behind the veil, behind the curtains, the system is the same: rigged, so far-fetched from reality that reality itself is in danger of becoming a distant dream…
What do you think? Does the cryptocurrency market function the same way as the financial derivative “market”? Why not? Let us know your opinion in the comment section below!
Images courtesy of Wikimedia & Pxhere.