By: Jan Strandberg
Just when you thought the market couldn’t get any worse after the Terra Luna fiasco, things went haywire. First, the rumours about Celsius getting rekt, and then you have one of the leading VCs / market makers, 3AC getting hit and liquidated. Oh, and if this wouldn’t be enough, the Night King (FED) decided to raise interest rates by 0.75 bps. Just a bloodbath after a bloodbath. If you ever watched Game of Thrones, the final season, you can notice similar desperation. The Night King (FED) has finally arrived to take what is his, after giving his ten years of endless summer. And for us ordinary plebs, noble knights and royal guards in the industry, it’s time to face the facts; the winter is here. Bring out those winter jackets because it might start to get colder than before.
What makes this winter different from the last is the amount of counterparty risk within the industry. Almost all leading VCs or behemoths were connected, which is why the cascade of VCs getting hit escalated. The big domino effect of the banking industry back in 2008 is, in fact, the same thing happening right now. VCs took on way too many risks and thought a default could never happen to them. We tend to believe that if a company has assets over 5-10 BILLION$$$, it is too big to fail. Liquidity is all that matters, and liquidity started drying up fast when The Night King (FED) decided it was time to take back the seven kingdoms. And boom, we had a perfect nightmare in place. I hope we all learned a crucial lesson.
Now we are in a situation where this counterparty risk keeps going left and right; we might still see more extensive and heavier moves. We could see Bitcoin drop to sub 13k and Eth back to sub 400$. If you had asked me about this two months ago, I would have said we would never pass 20k. But seeing what is happening and how much leverage there has been in the market, these numbers are starting to make sense. What also makes us different from the TradFi industry is that we don’t have a government that will eventually save us from all these cascading behemoths. If a player falls, there is no safety net for us plebs. And actually, that might be the more considerable change that will come during the following years; the TradFi rules that sent so many of us on this quest to decentralize the world will eventually come to an end, and TradFi will come back with its own changes and rules. But looking back at the tech bubble and its outcome, I would still argue that we are far away from TradFi taking the lead on regulation. So, when we are faced with the reality of the present, and the likelihood of going back to the summer and killing the Night King seems unlikely, it is essential to go back and remember what this “magic internet money” does for us in the world.
In 2018 when the last crypto winter came, I thought it would take a decade to rebuild what was lost. I had many friends and family reach out to me and say, “Ha ha, we told you so; Bitcoin is dead. You should have never trusted this fake magic internet money”. But despite the market being down -80% and my portfolio looking like it got nuked by the atomic bomb, I see the industry moving forward. From 2018 to 2020, I traveled to more than 40+ countries, mainly to the 3rd world countries and saw the adoption there accelerating. In 3rd world countries, this “magic internet money” was used in more ways than I could ever imagine, and the use cases were endless. Instead of speculating and trying to figure out what the next shitcoin will be to pump or get listed on Binance, people were focusing on real-life use-cases.
I saw big import and export businesses using crypto as payments. I saw companies using crypto for payments because their banking infrastructure couldn’t support their business needs. Or for the simple act of sending money to your family because using standard banks was impossible due to middleman fees or the amount of money you could send from one country to another was too low. But enter the famous “magic internet money” that lets you send any amount of money anywhere in the world in less than one minute and lets you access a better rate often than you get from the standard bank. I saw big oil companies using Bitcoin mining farms with their excess oil and garbage turned into cheap electricity.
The use-cases for this “magic internet money” accelerated more and more industries, and the revelation that possibilities are endless continues to spark innovation. Bitcoin was especially getting a lot of adoption, but in late 2019, stable coins started to rise. The rise of inflation in 3rd world countries ( Venezuela, Nigeria, Kenya, etc.) accelerated this adoption. The use case of preserving wealth when paper money tanks, and you have no other option but to hedge with this “magic internet money” actually saved many lives. We think here in the west, a 10% inflation on your money is bad; what about 1000% inflation overnight? We often in the west don’t see or think about these things because they are not affecting us. But that is where the crypto strength comes in. Despite how hard we in the west try to destroy this ecosystem with greed and speculation, the actual use cases of crypto outweigh these by 10 to 1.
In late 2020 when the market started to come back, we saw the next phase of crypto, the web 3.0 infrastructure. A new financial infrastructure was being built with DeFi. The primary use cases of sending and receiving money, and wealth preservation, were now taken to the next level with the help of decentralized money markets, decentralized lending and borrowing, and all the other beautiful things that we built during this bull run (Yes, even those lovely NFT JPG ).
This is a MAJOR turning point in human history: to have access to the same opportunity no matter where you live. Imagine families in the 3rd world countries being able to own stocks and gold and be able to save and grow their wealth. And all this is possible because of the “magic internet money.” Wonder where magic comes from?
For all of you watching your portfolios dwindle and are in desperation, cycles are expected, and the use cases for crypto are being compiled. Buckle up and enjoy; you might be surprised how early we still are.