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Many people seem surprised that crypto has fallen off a cliff. I am not! I wrote about this in December saying that we were about to hit “The Chasm” where blockchain technology enters the trough of disillusionment. Literally: This is the graphic from that piece:
So we are today in the midst of the cryptodammerung and I want to share a year-old post from the boys at Foot Guns on the logic of BTFD. This is not investment advice. And I’m not sure I even agree with it in concept. But it’s a useful lens through which to examine at the world at this moment:
Four great quotes from the best investor of all time Warren Buffett, which I believe are very applicable to current financial market environment;
“Nothing sedates rationality like large doses of effortless money”
“Speculation is most dangerous when it looks easiest”
“What the wise do in the beginning fools do in the end”
“Attempt to be fearful when others are greedy and be greedy when others are fearful” . . .
Whether it is through buying equities, certain meme stocks, cryptos, or NFTs, there are a lot of people who have made large doses of effortless money. Some (if not many) even consider quitting their jobs and become a full time retail day trader, which is not rational for most (if not all).
Linked to 1 is quote 2. Despite high volatility, mostly in cryptos, less so in equity markets for the last year, the buy the dip (BTFD) strategy looked easy. Making money trading, investing & speculating cannot be easy, not for the masses. The potential for high returns is caused by the fact that risks (to lose money) are high, and it is very difficult to scoop money out of the markets, from others, consistently.
Quote 1 and 2 lead to quote 3, which is also called the fear of missing out (FOMO), and the narrative following the price, which causes markets always to overshoot to the upside and downside. Many are intoxicated by the returns that the early Bitcoin adopters made when they gambled USD 1000 when Bitcoin traded USD 100, and now believe they will be able to repeat that when they get in at USD 50k.
What for me really the sign of peak speculation & irrational exuberance is, is the recent NFT frenzy and then specifically the pet rocks. Take a step back, regardless of assumed innovative underlying technology and future potential use cases, the fact that people/entities are paying > USD 1 mln for a digital picture of a rock must make us consider what is rational about that, and what it means for the extent of excess in speculation and ability to throw money at nothing of value really. I rate it as obscene and a sign that we r building the same environment which caused the internet stock crash in 2000 and the global financial crisis in 2008. FOMO, extreme speculation, often in combination with leverage, create the conditions for markets to eventually break.
So we now come to quote nr 4. Buffett’s wisdom suggests us to sell rather than buy today. I won’t sell, LOL. This is I think contributing to current market environment too. We have quite a lot of diamond hands in the financial markets nowadays . . .
I wish the FED not only tapers, but fully pulls the rug, creating a serious setback in the financial markets broadly, get speculation reduced, and make people much more aware of risk, and the difference between a digital pet rock and a corporation producing valuable goods and services profitably consistently. This could prevent an enduring market collapse and a global recession later on (The Big Short style). Those NFT pet rocks are the canary in the coal mine. And I will BTFD.
Seven weeks from now, your friend and mine Hannah Yoest is going to run a race that would put most of us in the ground. Her limited-series newsletter about this crazy project is amazing.
Scott Hines reminds us that tech sux and always has:
I can’t imagine that I’m the only one feeling this way as talk of “the Metaverse”—a word seemingly-unironically borrowed from Neil Stephenson’s 1992 dystopian sci-fi novel Snow Crash, where it was decidedly not a positive thing—seeps further and further into our daily discourse. It’s the next phase of the internet, swears Mark Zuckerberg, the man who created a website to rate the hotness of his classmates and eventually imperiled democracy in doing so. You’ll be living a parallel life online!
To date, this supposedly-groundbreaking concept has mostly been demonstrated through clunky animations of virtual-reality gatherings—business meetings, social gatherings, raves—that have all the visual appeal of Nintendo Miis milling around before you launch a game of Wii Bowling. . . .
WELCOME TO THE METAVERSE
The first wave of widespread internet adoption was heralded by similarly-breathless proclamations of how the technology would change the world. Images were sold of wide-open roads and flattened geography, of walls falling down and an entire globe being stitched together. Not all of this came to pass, of course, and the parts that did weren’t always good.
But there was something to it, because what the technology really offered us was the idea of connection.
It was offering us each other.
For an individual’s sphere to expand from their own town to the whole world, for theoretically anyone to be able to speak to anyone else regardless of distance—well, this was legitimately revolutionary. I’ve benefited from it greatly, from the numerous friends I’d never have made without it, to the ability I have to type this onto a screen and have you read it almost immediately.
At some point in the last decade or so, though, we hit a critical mass. Practically anyone can talk to anyone else, but there’s a limit to how many conversations each of us can carry on, and how productive those can be when we’re all chattering over each other. Online conversation has become overwhelming, toxic, and destructive. We’ve run out of connections to make, and that means tech has run out of things to sell.
To simply re-render those same offerings in 3D space with digital avatars isn’t reinventing the wheel—it’s putting a new hat on Malibu Stacy and hoping we’ll buy it.
And then: If you’re a Bulwark+ subscriber, hit the comments to chime in on the following discussion topic,
The metaverse: Menace or farce?
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Menace or Farce? Both. As in "our weaknesses are also our strengths and vice versa." And just like FB, the world would ultimately be better off without it. What it is not, though, is a Place. Have we become so devoid even of simple humanity that we prefer to be virtual rather than real? Apparently. Is having some fake friend 10000 miles away better than having coffee with your next door neighbor? Hint: No. The pandemic should have underscored the need for human contact, not the reverse. We need real community, not dungeons and dragons. Or maybe I'm just showing my age.
As someone who believes that FaceBook is evil and has not touched it since 2008, I’m going with a menacing Metaverse. I also wonder who has time to create a fake second life? Most people complain of not having enough time in the first real one.
Menace or Farce? Both. As in "our weaknesses are also our strengths and vice versa." And just like FB, the world would ultimately be better off without it. What it is not, though, is a Place. Have we become so devoid even of simple humanity that we prefer to be virtual rather than real? Apparently. Is having some fake friend 10000 miles away better than having coffee with your next door neighbor? Hint: No. The pandemic should have underscored the need for human contact, not the reverse. We need real community, not dungeons and dragons. Or maybe I'm just showing my age.
As someone who believes that FaceBook is evil and has not touched it since 2008, I’m going with a menacing Metaverse. I also wonder who has time to create a fake second life? Most people complain of not having enough time in the first real one.