For Crypto to "Win", it Has to Solve its Own Problems

17 thg 12, 2022

The idea of "smart investing" comes with the assumption that the market rewards reason and punishes irrationality in the long-term. What they don't tell you, though, is that the opposite is often true in the short-term. If you want to make money, more often than not you do have to have the discipline to move contrary to what most are doing.

It's been almost a decade since I started getting into this stuff but the above still seems to hold true. Crypto has been mostly flat for about 6 months now, but has stayed mostly stable. The last bull run had a similar pattern where it climbed to new highs (BTC $4000→$16000, ETH $100→$1400) then went back down to where it was prior. (And stayed that way for a few years.)

The projects that were diligently working on their product even after the dip ended up reaping the rewards of the 2020 rally and did very well for themselves. The rivalries between Bitcoin, Ethereum, Dogecoin, Tezos, Cardano, Ripple, EOS, etc. were there even back in 2018, but the arguments were mostly about technical differences and felt less “personal”. This time, a lot of arguments you see on social media have more personal, political, ideological slants - a sign of the irrationality of mainstream money having arrived, perhaps.

For what it’s worth, despite the FTX scandals and the very negative media coverage of crypto in recent weeks, the price hasn't really moved all that much. Chances are good that the ones that were going to leave are already gone and we're only left with the ones who are in it for the long-haul. While the talking heads gripe about their losses in public, the builders will continue to build, pushing the industry where it needs to be for the future to come. That is the hope, anyway.

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Long-term strategies only work if you're willing to wait at least one market cycle since the system needs time to work itself out - and I haven’t seen any exceptions to this rule, thus far. But having been through 3 crypto winters already, I’m starting to wonder what’s really taking so long for us to get to where we need to be - the “big ideas” in crypto (transparency, accountability, partnership automation) can already be done with distributed ledgers, but the industry has been slow to adapt to it, to say the least. The problem is that we're not really utilizing blockchain technologies the way we should be: case in point, when you look at all the people in the media and social media talking about how much money they’re making, how do we know if what they’re saying is actually true? We have no idea - we’re just taking their word for it, and now we’re finding out that many of them we’re just trying to lie and grift their way to the top. Whatever happened to "verify, not trust"?

Having gotten too used to low interest rates, the fiat markets are poised to be in big trouble over the next few years - if not more. The trends do say that when an economic system goes into disarray, crypto adoption tends to go up. But in order for that to happen, the crypto community does need to convince the world that it's safer to park their money in coins rather than fiat - which, if we're being honest - we're not quite there yet.

But unlike fiat institutions that are saddled with legacy and protectionist frameworks, crypto has the tools to fix itself if it wanted to - the advantage of being a new industry that has the energy and flexibility to adapt. The current irony is that crypto is suffering from the very problems it poised to solve - but a lot of it is holdovers of bad habits from Web2 and traditional fiat. You could probably argue the SBF's actions was a product of the fiat world, not crypto - there's a reason why there are those on the “inside” trying to protect him now. But FTX is also a preview, in a way, of what's to come to the fiat worlds as we head further into the recession - what they do to SBF could be them next - which is why they feel like they need to protect him at all costs, despite the blatancy of his misdeeds.

In a way, SBF did the industry a favor in getting the skeletons out of the closer earlier than later. For fiat, the tide is only just starting to pull. Crypto will either set the new standards for transparency, accountability, and decentralized governance - or it’s going to fall into old habits again and go to 0. (There is no reason for people to use crypto if it’s just going to be Web2.1 - the incumbents have that covered already.) It’s going to be an interesting ride over the next few years, either way.