The Coming Crypto Crisis Opportunity
I want to get ahead of this one. I suspect a plan is being rolled out. A recent article in the Financial Times alerted me to it. The plan is to coordinate media to blame crypto for the next big crash. I also think a big crash is closer than we think.
This is not the first time the neoliberal Financial Times has written about a ‘crypto crisis’. You would think that, by now, mainstream Keynesian journalists would be a bit more cautious when crafting their black-and-white opinion pieces. The author of the latest piece, Rana Foroohar, is a noteworthy critic of cryptocurrency. Her stance here tells you all you need to know: Blockchains are nice, but only if they are used by central banks.
Okay, so, I know if you’re reading this and have been cheering on crypto for a few years now, you’re ready to roll your eyes and move on. Stop! Her article is far more than another piece of fud.1 I’m worried because this recent article is an echo of one written in The Atlantic in January. It would be enough that The Atlantic is involved. When you see an Atlantic opinion piece about how something is definitely not the fault of American banks echoed in other media, you know something more sinister is afoot.
“The coming crypto crisis… the coming crypto crisis…” Have you got the message yet?
"Look into my eyes... you are getting sleepy..."
It's a form of suggestion. Sometime in the future a little bell will ring in your Bernaysian2 head.
There are lots of fat, stressed-out people nowadays. Many of them drink too much wine. Overdoing wine is certainly not to be sneezed at. Is their bad health all wine’s fault? No. Wine in moderation is good. Crypto in moderation is good. Where's the blame for seed oils and stress?
The apt question to ask is: Even given a recent surge in crypto’s popularity, what is the percentage of it in portfolios? 2% at most?
Be suspicious.
Maybe I'm being too suspicious. Perhaps these are just genuine concerns by people deeply unsympathetic to crypto. I need to offer more than just a heads-up about a psych-op.
Let's break down and analyze Ms. Foroohar's argument.
- Cryptocurrencies are much more volatile than normal investments.
- When volatile assets get deregulated, it acts as a spur to adoption.
- A type of cryptocurrency known as ‘stablecoin’ has just been deregulated.
- Hence, investors have just been spurred on to adopt an overly volatile investment.
- If interest rates go up, cryptocurrencies fall faster and further.
- Investors would sell their cryptocurrencies in a rapidly falling market, because that is in the definition of a volatile asset.
- When stablecoin are sold, the stablecoin issuers are forced to sell their treasuries.
- The combination of crashing crypto market and a firesale of treasuries would cause a catastrophic crash.
- Hence, cryptocurrency will be responsible for a coming catastrophic crash.
Now, laid out in nice syllogistic form, we can see the problems with this argument.
- What is the incentive spurring on investors to buy volatile, 'deregulated' assets?
- If rising interest rates trigger the fall, what causes the rising interest rates? Money printing? Capital flight?
- Aren't money printing and capital flight more serious issues than cryptocurrency?
- Why wouldn’t all the extra supply of treasuries in the firesale be absorbed by the market?
- ‘Deregulation’ means less regulation. Where is all this previous regulation?
- If crypto was banned, would the demand for high ‘beta’ assets go away, or would a substitute be found? If you ban cocaine, will cocaine addicts stop taking drugs?
Blaming crypto misses the mark. If there’s one thing above all to blame, it's the moral hazard caused by bailouts and cannot-fail leverage since 2008. In my opinion, an insured, centralized reserve should never pay interest, and no bank should ever be too big to fail. Everyone who levers for too long should be wiped out.
Keep your eye on this one. When you see more 'coming crypto crisis' articles, just think: The coming psych-op to bail out banks yet again.
- 'Fud' is an acronym for 'fear, uncertainty, doubt'. It's essentially the negative perception of crypto that most mainstream articles try to lodge in their readers' brains. (Return)
- Edward Bernays, the father of P.R. He made use of Sigmund Freud's analysis of the subconscious. Freud was his uncle. His legacy can be summed up with the title of one of his books: The Engineering of Consent. (Return)