Excellent write up. It's absolute lunacy to me the amount of money that crypto has been able to attract from 'investors' when the value proposition is so tenuous. When I listen to a crypto promotor attempting to attract capital it's pure psychobabble.
However, I suspect there may be an aspect of crypto that could keep the more prudent fleecers from having to unwind semi-indefinitely.
If you break the token holders into four'ish broad categories along these lines:
1) Idiots being fleeced (greater fool investors)
2) The insider 'crypto bros' who are able to control the float, run the exchanges and impose transaction fees.
3) Criminal entities using it for laundering, transactions, payments, etc.
4) Capital flight that's attempting to dodge capital controls (eg CNY -> USD, EUR or RUB -> USD, EUR)
I'd guess if (3), (4) maintain large enough continuous flows in/out a prudent (2) could possibly keep the mirage going. They could use the fees to build a cushion of 'real' reserves and only live off the excess. Occasionally pumping the mirage would allow them to pump their fees and attract more (1) to help them pad the 'actual' reserves. They'd need enough self control to not overdo it. They'd also need to restrict the people who could uncover the truth. So the companies involved likely would have a very small cadre of individuals controlling the 'black box'.
If you could quantify the cash flows generated by (3) and (4) and the transaction fees that they generate that may give you some indication of how much 'real' capital is in the system at any given time. And then if you could look at 'real' reserves that back the mirage in relationship to that 'real' value you could guesstimate a probability of an unwind.
When you say in the footnotes that "daily trading volume of BTC is 10% of its market cap", have you looked at how much of that is in pairs with US$ and other currencies that you can use vs. Tether and other crypto coins?
I looked a few months ago and was shocked to find that at the time only a few percent of BTC was traded against real-world money. This furthers your thesis about illusionary valuations and convertibilities, even for a blue-chip crypto like BTC
Appreciate you looking at this SBF mess. I have no ties to any tokens or institutions in here. But would be curious what value you do or do not see with respect to the more core projects (e.g., bitcoin, ethereum) and the overall value propositions offered by blockchains. No worries if it's not interesting to you or you don't have time. But I'd love to know more of what you think of the value beyond the SBF types...
Excellent write up. It's absolute lunacy to me the amount of money that crypto has been able to attract from 'investors' when the value proposition is so tenuous. When I listen to a crypto promotor attempting to attract capital it's pure psychobabble.
However, I suspect there may be an aspect of crypto that could keep the more prudent fleecers from having to unwind semi-indefinitely.
If you break the token holders into four'ish broad categories along these lines:
1) Idiots being fleeced (greater fool investors)
2) The insider 'crypto bros' who are able to control the float, run the exchanges and impose transaction fees.
3) Criminal entities using it for laundering, transactions, payments, etc.
4) Capital flight that's attempting to dodge capital controls (eg CNY -> USD, EUR or RUB -> USD, EUR)
I'd guess if (3), (4) maintain large enough continuous flows in/out a prudent (2) could possibly keep the mirage going. They could use the fees to build a cushion of 'real' reserves and only live off the excess. Occasionally pumping the mirage would allow them to pump their fees and attract more (1) to help them pad the 'actual' reserves. They'd need enough self control to not overdo it. They'd also need to restrict the people who could uncover the truth. So the companies involved likely would have a very small cadre of individuals controlling the 'black box'.
If you could quantify the cash flows generated by (3) and (4) and the transaction fees that they generate that may give you some indication of how much 'real' capital is in the system at any given time. And then if you could look at 'real' reserves that back the mirage in relationship to that 'real' value you could guesstimate a probability of an unwind.
When you say in the footnotes that "daily trading volume of BTC is 10% of its market cap", have you looked at how much of that is in pairs with US$ and other currencies that you can use vs. Tether and other crypto coins?
I looked a few months ago and was shocked to find that at the time only a few percent of BTC was traded against real-world money. This furthers your thesis about illusionary valuations and convertibilities, even for a blue-chip crypto like BTC
Aged Well
Excellent recap! Thanka for all the work you share!!
Thanks for this write up!
"Some people end up with dollars, others end up with tokens."
Also, it turns out, some people end up in jail! And thank goodness.
Appreciate you looking at this SBF mess. I have no ties to any tokens or institutions in here. But would be curious what value you do or do not see with respect to the more core projects (e.g., bitcoin, ethereum) and the overall value propositions offered by blockchains. No worries if it's not interesting to you or you don't have time. But I'd love to know more of what you think of the value beyond the SBF types...
Wow, this piece was really well timed, good job TLB
Best way to short?