Like many of you, I found bitcoin but was not ready for it yet. I didn’t fully understand the fundamentals, such as the trade-offs for true decentralisation, its tether to real-world expenditure via electricity consumption, and its monetary policy based on fixed supply. It was all too foreign a concept, and I was here for the gains. When your mentality towards bitcoin is putting x amount of fiat in and taking x amount of fiat out soon, you discount many of its unique properties.
It doesn’t matter at all, your goal is to earn more fiat currency for taking on risk and riding volatility, and any asset class can offer you that. Sure, bitcoin offers vastly more volatility; compared to traditional investments, cryptocurrency provides even more.
If all you’re chasing is yield, the underlying fundamentals don’t matter; you’re simply looking for a vehicle that will pump hardest. Once momentum flows in its direction, it will make the highest multiple for you to get out.
I’m sorry to burst your bubble, but this is not investing; it is, and always will be, gambling.
Investing is about putting your capital to work in a way that strengthens the vehicle in which the capital is deployed and benefits not only yourself but everyone who uses the service.
Once I accepted this fact, after getting wrecked playing “investor” with shitcoins, I started to think deeper about the whole “cryptocurrency revolution”. The more I learned, the more I realised, cryptocurrency is no different from fiat currency.
After being a shitcoiner for some time, I finally made the connection.
Finkle is Winhorn, Einhorn is Finkle!
Fiat is crypto; Crypto is Fiat!
And when I did, boy did I feel stupid and dirty; I scrubbed my computer and burned those wallets and eventually found my way back to bitcoin.
For those of you who don’t get the reference, here is the original scene for context. You should do yourself a favour and watch this movie. Plenty of non-PC references in it that would not fly today.
I appreciate every single one of them, alrighty then, back to the serious stuff.
Once it clicked, I was out there screaming to friends and family.
Do you think anyone listened? No, why would they? Anyone who gets into cryptocurrency automatically feels like they have a genius pass and cannot be told they’re making a mistake. No one is going to listen when they’re making paper gains; it’s only when economic reality sets in that a few will humble themselves to listen.
The rest will blame the market and not themselves and repeat the same mistakes in some other hair brain scheme.
The bitcoin lie
But bitcoin is old tech; it was merely the first mover in the space, and like all other technology, others will innovate and disrupt the first mover, and that’s why we should get into these tokens. That’s the story you’ll get year all the time from cryptocurrency advocates or, as I prefer to label them, shitcoin apologists. They’ve always got a subsequent narrative, a future upgrade, an upcoming partnership, a new layer that will turn them into the dominant monetary network.
When I hear these claims, I bring it back to the current system and, it’s like saying, oh, look at the South African Rand or the Kazakhstani tenge once we upgrade it with this new feature, everyone is going to leave the dollar and the Euro for our currency.
The narrative may work for people on the fringes and those who own the currency, but it’s pretty far from reality. Cryptocurrency, as in the case of fiat currency, is all a game of setting up wall gardens into their network so they can bleed participants dry through inflation.Â
Fiat and cryptocurrency requires a leader
Both fiat and cryptocurrency require a leader to operate it, to make the final decisions. Since nothing is enforced by code or law, The leader is there to provide a strategy and react to marketing conditions. If you prefer to have your purchasing power held in a system that can bend to the whims of a leader, so be it.
Nothing wrong with that, but you will have to pay the cost of any mistakes they make. It is most likely they won’t be the ones feeling the pain of economic reality. Just note that I’ve yet to see any president of a country with failing currency suffer for their decisions, nor have I ever seen a founder of a shitcoin suffer when their project blows up.
A project with a leader provides a massive single point of failure. If the leader is compromised, let’s say by a government or corporate interests, who will maintain the consensus rules of the network for the users. You can look at fiat currency and see how quickly financial corruption spreads once the door is opened.
Remember, quantitative easing was sold as a once-off; now, it’s an every month occurrence to maintain the status quo. Don’t think your cryptocurrency will fall for the same traps if there is a single pressure point to manipulate.
Fiat and cryptocurrency networks central points of controllable and aren’t secure.
The entire point of a cryptocurrency is that it is meant to secure the ledger and its transactions at all costs, something bitcoin focuses on with the distribution of nodes. In cryptocurrency and in fiat, you trust large third parties to run your transactions and have to rely on these middlemen. This opens up the ability to censor transactions or drive up the cost of certain transactions arbitrarily.
When your network doesn’t provide absolute security like bitcoin, it only becomes a larger honey pot for insiders and outsiders. The more value is sitting in the network, the more temptation to extract it for yourself.
We see this in the fiat system all the time, as politicians continue to pay themselves massive salaries for little to no work and diminishing results. They rely on the ingenuity of other economic participants to create value and back up the value held in the currency units they divert to their bank accounts.
Fiat and cryptocurrency networks has no oversight.
This leads me to my next point; these cryptocurrency networks are anything but secure. If you’re not running a node for your preffered cryptocurrency network, how do you know it’s running properly?
- How sure are you that double spending does not occur?
- How sure are you of the units in circulation?
- How sure are you of new units created?
You’re not; there is no security; you’re simply trusting what others are saying, the same way you would your central bank and your retail banks. You’ve merely traded one opaque system for another with a new set of leaders who also have every incentive to lie to you.
Fiat and cryptocurrency has no cost to produce.
Unless you’re using proof of work to enforce restrictions on the issuance of your unit of measurement in your network, it essentially costs nothing to produce. These tokens are nothing about numbers on a ledger with no backing or tether to the real world. As in the case of fiat, the powers that manage the network can issue more or less currency as they choose simply by changing parameters in the code.
Sure there may be some complaints in the community, but ultimately, the community are not in control of the network; they are along for the ride, ready to be exploited for the promise of wealth.
When a currency cost nothing to produce, nothing is stopping you from making more; the only thing that slightly curbs you is peoples belief in the currency. As long as they believe in it, you can keep creating units and enriching yourself at the expense of other participants.
Fiat and cryptocurrency monetary policies are undefined, and it can change.
When it comes to bitcoin, it’s pretty straightforward; we all know there will only ever be 21 million coins, and every four years, the block reward is cut in half. In addition, new bitcoin is released into the network every ten minutes. That’s bitcoin’s monetary policy; in a nutshell, it will continue on that path as long as network participants agree with it.
Any deviation from this policy will severely compromise the network integrity, so everyone who supports and holds bitcoin has an incentive to uphold the rules.
In fiat and cryptocurrency, the rules are often masked with complicated math, jargon and you are kept on a need to know basis with little to no ability to verify anything. Then to add insult to injury in both fiat and cryptocurrency, we see monetary policy changes put into place to “stimulate” growth or whatever reason they come up with to think they are smarter than market forces.
There is no stability or reliability in these networks, and trying to make any valid economic calculation on today’s policy may not work in a few years when it changes, so you cannot precisely build anything long term on these networks.
As the collapse of the Bolivar and Zimbabwean dollar took down many businesses, so too will cryptocurrencies kill the applications built on top of it.
Fiat and cryptocurrency have have cantillionaires.
A cantillionaire refers to a wealthy person whose riches did come from production or clever capital allocation but the built-in unfairness of the fiat monetary system. Yes, some people got in on bitcoin early; they either bought a bunch or mined it on their computer and now sit with a life-changing amount of money.
That is true, and I accept that they were rewarded for their risk-taking and their ability to hodl their coins long term. If these people want to make more bitcoin, they either need to try their hand at trading, start a bitcoin business, mine more bitcoin or contribute more fiat and pull coins off the open market.
There is no way without effort or expensive to acquire more bitcoin.
Most early bitcoiners have considerably drawn down their holdings to access the capital for one or another reason, dispersing the coins to new holders.
In fiat and cryptocurrency, you can avoid ever drawing down your position. The fiat game revolves around acquiring assets; you would take the money you have, buy up assets, then borrow against your assets to create new fiat and repeat the process.
In cryptocurrency, you can avoid touching your principle through staking, all you need to do is sit on your coins, and it will access more currency nits far faster than anyone else in the network, and you never draw down your wealth.
In both cases, you can suspend economic reality for yourself, at the expense of others, in an unfair system.
Needs to find new reasons to exist
There is very little, if any, reason for cryptocurrencies to exist. If your favourite cryptocurrency died tomorrow, would anyone notice? I hardly think so. Cryptocurrency is not about creating technological innovation; it’s about exploiting the failing fiat system.
As people struggle to find ways to access assets to store their wealth outside of currency, cryptocurrency aims to funnel some of those funds looking for a home into their ecosystem. The more funds they can absorb from fiat or bitcoin, they can then dilute within the ecosystem they control.
The longer you hold their token, the longer they can bleed you dry, and you can see it in the marketing, it all about holding the coin for the next airdrop, the next DEFI project, the next layer two; it’s a constant marketing machine trying to get you to keep hold of their dying coin.
It’s the same with fiat; when a local currency sees continuous decline, you’ll see governments spring into action, always looking at ways to keep citizens from investing abroad, holding a foreign currency with the aim of “protecting” the currency.
But who are they protecting? Not me! I want out! I want protection; in fact, you are keeping me from getting protection. This is the same game plan used by altcoins, and just like weaker fiat currencies, it’s only going to go one way and speed up each year.
I am not trying to talk you out of your positions; you do as you please, only know this as your cryptocurrency and fiat currency continues to soldier on with an inferior monetary policy. Bitcoiners will be the beneficiaries. The longer you hold crypto or fiat, the less purchasing power you’re going to have relative to holding bitcoin.
It cannot be coincidence
It cannot be a happy accident that cryptocurrency and fiat share more similarities than cryptocurrency and bitcoin. The way I see it is an ocean of purchasing power sitting in fiat, looking for a home, and much of that is flowing into a bitcoin lake, which continues to get bigger. However, puddles on the path between bitcoin and fiat and people are mistaking them for something radically new when it’s not.
These are merely purposely dug potholes to distract you from getting to bitcoin.
