Cryptocurrency Adoption: The Consolation Prize
Cryptocurrency has had an interesting history and may have an even more interesting future. As software developer, bitcoin laned on my radar in 2009 when I read the whitepaper as shared on Hacker News. Bitcoin sounded like quite the technical accomplishment. I watched from the sidelines as the first exchange went online, scaling challenges were tackled, and the first bull run, exit scams, and crash played out.
Fast-forward a bit, I tried my hand at crypto trading during the 2017 bull run and managed to cash out a 500% return on BTC trades. Time revealed that (mostly by luck) I sold just a few days before the blowoff top and subsequent crash into crypto winter.
When BTC settled down to 4k in March 2019, I made some BTC spot buys along with ETH and a dozen alts because the “halvening” narrative made some sense. I was a little skeptical and tried to research the industry but it seemed like there was nothing but hype. “Whitepapers” were filled with technobabble and all anyone talks about is price appreciation. Eventually, I realized that there must be a lot of venture capital behind the relentless marketing and hype campaigns so I reasoned that this alone could drive price appreciation, even though crypto seemed to have failed at all of the major use cases.
In short, my trading thesis became: “Either Bitcoin adoption is real, or major players in the crypto industry are collaborating on a pump and dump even bigger of 2017. Either way, I’ll make money.” Skipping ahead to 2021: crypto “investments” paid off and these paper hands cashed in my windfall.
If it’s too good to be true…
After some serious due dilligence research into the integrity of the market, I am glad I pulled my money out. Thanks to a small community of people working against the crypto industry narrative, I started to learn what was really driving the price: Stablecoins (especially Tether’s USDT).
Tether claimed USDT was backed 1-to1 by USD; highly questionable at best and an obvious fraud at worst. But exchanges treat USDT at par value to USD which effectively gives Tether the ability to inject counterfiet dollars into the cryptocurrency markets. A lawsuit from the NYAG proved Tether’s reserves were not 1 to 1 as they claimed and they were fined $18.5M for fraudulent claims. Tether and collaborators managed to spin the bad PR to their advantage so for now, whenever they mint new USDT on the blockchain, crypto numbers go up but there is not enough actual cash in the ecosystem to pay out portfolios. This can only end in a massive crash.
What lies ahead
Given that Tether and frens have an impressive strategy to dodge legal challenges and manipulate the market, the bull run may be just getting started. February marked the beginning of media attention and enthusiasm. Tethers settlement with the NYAG, while damning, effectively gives them a yellow light to proceed with the pump and dump. They have less than 90 days to finish it and appear solvent.
To The Moon!
The stablecoin pump is progressing according to plan and the clock is ticking for the big dump. A few major institutions are probably in on it, but they bought in years ago.
Coinbase is preparing for an IPO which I suspect will lead the market to a the final manic blow off top. Standard operating procedure of buy the rumor, sell the news. Most likely, a black swan narrative will be promoted to explain the dump that crashes the crypto markets and brings related stock prices back down to earth. I know when I’ll be shorting this ponzi.
End Game: Stablecoin frauds collapse
Long-term, institutions may indeed “adopt” crypto, but they’re only interested in selling shovels to fools chasing a gold rush. Instead of adoption, smart players realize that cryptocurrencies are getting neutralized and assimilated into the existing system. Bankers will be supporting the STABLE Act because they will not tolerate an unregulated competitor reaching their scale. The STABLE Act will put an end to accounting scams like Tether and reveal the true market price of cryptocurrencies as they shed 80 to 90% of their value.
As a consolation prize, Paypal, Apple and others will help bagholders cope with their losses since crypto will be somewhat spendable on real world stuff, likely with high fees.
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