The Future of Crypto
Crypto started with a lot of hope. Here was a way to:
• Eliminate a lot of middle men like banks, insurance companies, and brokers
• Create privacy to eliminate snooping governments, lawyers, and ex-spouses
• Reduce costs due to fewer middlemen
• No need to rely on trusted parties
• New innovations
Now, that dream lies wounded on the beach. But it is not dead.
It was wounded by:
• Bad technology
• Lack of trust
• Government resistance
Greed was the biggest problem. People were seduced by the dream. Get rich quick. FOMO. Hypesters and hucksters.
I’ve seen this my entire career. I’ve seen the same thing play out in many markets:
• Electronic stocks
• Dot com
• 3D printing
• Meme stocks
• Real estate
• Cloud computing
• And so on and so on
The pattern is always the same. Giant pump and dump.
We are now in the stage where the FOMO and greed are being punished as they always are. People are learning relentless and powerful lessons. But there will be another mania coming in who knows what?
So greed is still a problem for crypto but it will be largely snuffed out as bitcoin continues it’s bear market down to below 13,000. At that point, there will be no significant greed left in the market.
The second biggest problem is government. Crypto can’t compete with government for the role of money even if crypto satisfied the requirements for money:
• Medium of exchange
• Store of value
Why? Because governments will never allow significant competition to their ability to control the economy through controlling money. Never.
Many governments, primarily China, have simply banned crypto. Others, are regulating heavily to the point where many of the reasons for cryptos existence will be eliminated. Do you really think the US will allow a mechanism for transacting illegal business or avoiding sanctions. No. Hey, they are trying like crazy to ban cash for the same reasons. The US and major countries will move to digital currencies but will give themselves a back door for tracking the digital currency. Then they will ban or induce people to eliminate cash.
Since crypto is very little competition to legal tender, governments haven’t really leaned on crypto yet but every day they choke it more.
The third major problem is that crypto became a trading instrument so people traded it on exchanges with bad technology that eliminated many of the advantages of crypto. Now we had to trust the exchange and the exchanges software. Worse the normal market which have many proven processes.
So what is the future of crypto?
Eventually, the bear market will end. At the same time, real uses will continue to grow. I am very bullish on platforms like Ethereum because they provide real functionality that people can use. Smart contracts, built on Ethereum, will grow and grow and will replace some normal functions that now exist. Government regulations will likely reduce the effectiveness of many of these innovations but, nonetheless, these will continue to grow.
So how do we make money?
The best way would be to innovate and create applications on top of the various platforms like Ethereum. You can be a billionaire doing this.
As a trader, I like being short crypto now looking for most coins to bottom at zero. Perhaps in a year, I might shift to the long side.