Crypto Crypt and FTX

BACK in 2017, when asked about cryptocurrency, I gave my honest answers in this column. In short, buy and read the book ‘Extraordinary Popular Delusions and the Madness of Crowds’. The. I could stop now.

In this book, there were countless examples of crowds rushing to solutions and “investing” “deeply” only to discover that the tulip bulb they had “invested” in was a tulip bulb. Whether it’s Tulipmania, the South Seas bubble, the Mississippi project, magnetizers, witch mania or haunted houses, the behaviors are the same, and today it’s still the same.

A tulip bulb, for example, was valued at almost $600,000 (in today’s terms) in 1637. In 1639, Rembrandt bought a superb house in Amsterdam for almost the price of a bulb.

A market was created on the stock exchange and tulip dealers (stockbrokers) made money by buying low and selling high at the expense of seller and buyer of course – even today this is always the same. The more volatile, the better. The houses were sold and the money invested in tulips. The houses were sold at ruinous prices, as the gain on the tulip (based on a “belief”) would compensate for it. Until it doesn’t.

Cryptocurrency, NFTs (non-fungible tokens), and blockchain are all very different, but normally go together. They are not. Do not invest in them unless you fully understand them and are prepared for any loss.

Crypto has a use, and a viable use in terms of digital currency, but no real store of value. The fact that someone has to ‘mine’ to find an algorithm has no reference to future value, and just because something is trading at $10 or $50,000 doesn’t mean it’s worth it.

If the value of the crypto drops from $50,000 to $10,000, it doesn’t mean it’s cheap, it means someone already paid $50,000 for it and they got it wrong. If I can teach you anything about value from 35 years of experience, it’s that if something can be cheap, it can get cheaper – a lot cheaper.

Just because it’s cheaper doesn’t mean it’s useful – remember Del’s face in Only Fools and Horses where Rodney comes back with lots of unusable items he bought at an auction. bids just because they were heavily discounted. This education was there for all of us, but only when the student is ready does the teacher come.

There is a part of your brain called the prefrontal cortex that modulates emotions. When we get very excited (fear or greed both work), our logical brain slows down or shuts down. We become very malleable and our thinking is binary – fight or flight.

It is this emotional binary thought process that has trapped many when looking at crypto/tulips for this fear of losing (FOLO). I have handled many tax positions over the past five years and none have profited from crypto, so take the pub talk about how much is earned with a pinch of salt.

Remember, the real need in the early days of crypto was the power to withdraw money from central banks and use your own currency. That’s fine, a good thing and a good use, but as for the “value”. What value would it have if a central bank or government banned it for a “reason”? Its value would have disappeared overnight.

It is well known that many centralized governments want a digital currency. Britcoin was deposited around 2025 by Rishi Sunak when he was Chancellor. I am deeply uncomfortable with the power that a centralized cashless digital society could wield in the wrong hands, so I would oppose it.

In a previous column, and to those who asked, I always said that a build-up of digital currency liquidity followed by a crash or corruption would then necessitate the aforementioned “regulation” . It would always come, so… get into the crash of FTX and a story that will unfold.

Keep in mind that the blockchain is the big story in crypto and all transactions are always visible and can never be changed, so finding $1 billion in missing money should be easy, right? ?

No surprise then when Google ‘FTX crypto regulation’ there are over 27 million results. In no time, we will have a call for regulated core crypto currencies, regulated by the ones the crypto world wanted to leave behind. This is the point I made in 2017 and it remains true today.

Peter McGahan is managing director of independent financial adviser Worldwide Financial Planning, which is authorized and regulated by the Financial Conduct Authority. If you have a financial question, contact us via [email protected] or by calling our regional office on 028 6863 2692


#Crypto #Crypt #FTX #Crypto

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