The crypto collapse, continued: is there anything that isn’t a fraud or insolvent?

Silvergate is the latest domino to fall, down 30% today after announcing a liquidation plan, on top of the 50% decline last week. And “Silicon Valley Bank” fell 70%. (Apparently Silicon Valley has its own bank…who knew.)

The whole crypto economy is collapsing. There is nothing that isn’t either a fraud and or insolvent. I have no idea how anyone can take people like Andreessen, Balajis, etc. seriously. Their whole philosophy/thesis has been uprooted over the past 1.5 years. Zero credibility. The iron law of ‘more social media followers = worse source of financial advice’, keeps being true.

For example, this aged well:

“Plan B” has 1.8 million followers. While his followers were losing money with his shitty advice and forecasts, I was banking it with my BTC trading method.

If you look at what happened, the wheels began to come off in May/June 2022. This was when BTC finally broke $30k support. I think a considerable number of traders and firms had taken on significant debt/leverage on the expectation that $30k would hold, and when it broke, it led to a cascade of failures. Leverage is dangerous enough for ‘safe’ investments like bonds, leverage on crypto is another level of stupidity/insanity.

Even if you support or foresee a techno-successionist movement or a sort of ‘objectivist utopia’, crypto is not going to be a part of it. At best it will be a tiny player, mostly for dark/underground markets. Same for web3, defi, or other acronyms and buzzwords. I remember Marc Andreessen was being interviewed by Tyler Cowen, and he could not give a single use case for web3 that isn’t already served by existing services/platforms. It’s like congrats, you reinvented Venmo but worse. He wanted to answer the question, but was limited by the constraints of his own imagination to come up with a use for this technology that apparently no one wanted or needed. (Memo to staff: dress rehearsals and pre-screened questions next time.) Even if it has a use, it’s not big enough to justify a trillion dollar valuation.

I am sympathetic to the idea of streamlining inefficient public services, like healthcare or higher ed, with private services, but not inferior substitutes. A bad problem does not mean we have to settle for a worse solution. For example, coding camps and ‘the trades’ are an inferior substitute for diplomas. I think we need the best of both worlds: superior substitutes.

Until the economics incentives change, we’re stuck with diplomas. Compared to government, the private sector is better at matching consumers with what they want, but creating an entirely new currency that will coexist with a much more convenient one (and oddly enough, wealth will still be measured in the old currency despite being obsoleted by this new, digital currency)? Not so much.