It’s impossible to know where the bottom is but I would say this. I don’t believe we’ve seen the bottom yet and I have a different view of it. I go back again to other asset classes that I’ve invested in for decades in every case traditional bonds, traditional equities, real estate alternative asset classes. Bottoms are reached with an event, a panic event as I call it. You can find it in every asset class you know back in the hedge fund days when they started gating these large hit multi-billion dollar hedge funds that shut down their liquidity and caused panic.
You saw bottoms in equities as they were being liquidated. Their long term was one of the classics in the last couple of decades. It was fun that was over-leveled and blew up. We haven’t seen that yet in crypto land. There’s no big guy who has gone to zero yet. I think that it’s still hard to say who it is because it’s going to be because of leverage in some kind of relationship in a counterparty holding that they have not disclosed and I’m just speculating right now.
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But that would be very healthy for the market to have that happen. Voyager is too small it doesn’t matter the rest of these guys were kind of irrelevant in terms of total market cap. Bitcoin in the crypto market itself has almost been cut in half in the total market cap. So, you would think we’re on our way to the bottom. But, I like a big panic event that’s always been a great way to bottom its towel throwing, capitulation, its massive volume, it’s total panic in the streets, and always a great buying opportunity. I have no idea who’s next tomorrow morning could be a month from now but it’s coming to a theater near you. It will definitely be a very good thing for this industry. It’ll be a great thing because it’ll take out all of the badly broken business models, the heavy leverage, the speculation that was too risky and pushes everybody and this kind of circle back to the conversation. You were with ben at wonderful reason. I’m an investor in a wonderful company. I need a place to store my crypto assets that fit into my compliance and accounting departments.
So, when wonder if I had was able to offer me a centralized wallet at ByBit. I was able to say to my auditors look you can audit this thing daily, weekly , quarterly, monthly. I can market each position for you at four o’clock even though it’s irrelevant in crypto land it trades 24 7. I think crypto has a very bright future. I’ll be bold enough to say in this very volatile market for crypto that within a decade it’ll be the 12th sector the S P. The reason is there’s just too much productivity, too much transparency, really strong vehicles for solving financial services problems that exist today like transferring capital. As I talked about earlier. It’s just too good and too efficient. So, it’ll remain the key is we need to get some policy where I think it’ll happen first with stablecoins and you ask the question. But, the stock market is no different than the crypto market. The stock market is still a little expensive if you believe we’re having a recession, probably fairly valued. If you think we’re having a soft landing the trouble is nobody knows. So, you’re going to see this fibulation going back and forth until we’ve resolved that question. We know where the fed stands in further rate hikes but there are some great companies that have lost 20-30-40 percent of their value and I have to admit.
I’m nibbling in equities as well just as I am in crypto and so I can’t call the bottom but I don’t use the leverage that’s the secret sauce. Everybody’s calling me up wanting to lend me money. I just say not interested in every cycle what happens is various actors and companies take on more and more aggressive positions using leverage to goose returns which is age-old it works it definitely works now. What you’re going to find in this situation are many crypto operators particularly lending platforms have never operated it with such volatility before. So, they were in the slow growth from bitcoin almost a decade ago from eight hundred dollars. All the way to sixty thousand and all along the way some of them became really aggressive in using leverage which is the traditional hedge fund model now what happens. This happens in equities it happens in bonds it happens in real estate. It happens in crypto cryptos Johnny come lately new asset class with a whole lot of newbies in it. You’re gonna see a whole series of these actors get crushed to zero over the next few months in the contagion of leverage being caught offside with the lack of liquidity Voyager is not that big a deal.
Its kind of irrelevant in terms of this diversified shareholder base. It’s not FDIC insured in any way. So, it’s not putting any stress on the government systems in any way. All the shareholders should consider themselves educated no different than when you go to Las Vegas and put it all on black. It’s red you lose. That’s exactly what’s happened here but the great news about this and why this is so good for the market. How this helps the crypto market is it educates the business models that aren’t going to work. So, it’s like taking a big spatula from the sky and scraping all the crap out of the market. It’s going to happen very quickly so anything that was built on a business model that isn’t is not going to work or can’t sustain volatility is going to be gone. It’s a good thing, it’s a wonderful thing, it’s going to leave the industry much stronger. We must mourn the investors that got wiped out to zero. But even they are better off in the sense that they’ve been educated.
You own crypto without leverage and you understand your counterparty risk don’t worry by the time all the litigation is over from all these bankruptcies. You’ll know everything about everybody lawyers are really good at doing that. They’ll be tons of class action if not just straight-on litigation to go after any assets they can get. That is sort of you know when a fish dies in the ocean. It goes to the bottom and that protein is reprocessed by slugs. I’m not saying lawyers are slugs they have more than single-cell proteins but they know how to get the last drop of any value there and they’re going to get it. It’s going to take five to seven years but all of this is good, so when I hold crypto. I know it’s very volatile. I have zero – zero leverage in any of my positions because I know tomorrow morning. I can wake up down 38 in any token any coin any project and really that’s exactly what’s happened. But if you put on the leverage you learn the very important lesson you go to Xero.
That crypto, the entire sector is going to get regulated all at once. That’s not going to happen the most likely scenario and this is a personal opinion. But, one I’ve been working on in Washington along with others is that we would like to get a policy on just stablecoins first because stablecoins represent a very powerful and efficient payment system. We think we can get bipartisan support between both parties supporting the American dollar as a default currency for a global payment system. It’s not going to be the Chinese one. It’s not going to be the Swiss franc. It’s not going to be the euro it’s not going to be the British pound and the reason it would fall and default to the US dollar would be that that is the currency used to denominate most commodities. So, the challenge you have right now and why there’s so much pressure to solve. This is it’s very inefficient to transfer us dollars over to Geneva then put it into Swiss francs and then buy Swiss nestle stock or whatever. It is you want to do over there. It’s really slow very inefficient very costly not transparent and not easy to audit
This article is a transcription of a video made by Jamie Tree
Original video: https://youtu.be/LFEuu68uGrs