Manias come and go. And then they come back again.
How unfortunate that this whole Terra-Luna fiasco would come while crypto is in one of its typical correction phases that have everyone calling for its demise, if not TEOTWAWKI, bringing both shame and heightened criticism from those who would clamp down on the future of finance that is trying to form legitimate pathways to credibility.
And yet, it's such a classic case of ego prevailing -- until it doesn't -- that I believe we can actually take comfort from the fact that some crypto has merely gone sideways near the troughs that had been forming prior to this blowup anyway.
Bitcoin is still bouncing around 30k and Ether is doing the same dance around 2k that it was doing long before news of the Luna crash hit. And this despite the connection that the egomaniac of the moment, Do Kwan, tried to establish between his ponzi coin and Bitcoin to give himself the backing that he surely knew his project was lacking to begin with.
Those of us who lived through similar manias like the Enron scandal, in which Jeffrey Skilling played the Do Kwan part, cleverly setting up derivatives within a House of Cards structure, can appreciate the way these monetary engineering schemes can hurt real people and blow grenade-like holes in markets -- and yet pass into the history books, even if they leave us no wiser from the wear to resist their next incarnation when it comes along 20 years later...
Back around Y2K, it was actually believed that investors could reap double digit interest payments from oil "players" claiming to move energy around "efficiently" on the grid. How's that working for Texas, the land of Enron, 20 years on from the scandal, where the creaky grid there can't even deal with weather in winter or summer to merely keep people alive in the America of the 21st century...?
The answer, sadly, is about as well as Do Kwan's "algorithms" that were going to pay investors an interest rate of 20% for "staking" one virtual digit against another -- this time on an electronic grid as creaky as the Enron energy House of Clubs...
As stated, this is unfortunate for crypto as it tarnishes both its reputation and valuation at a time when it's vulnerable in an ongoing price consolidation anyway. And surely it will give the Elizabeth Warren's of the Washington world some further (temporary) amunition in their crusade to stop the blockchain from usurping their and Tradfi's stranglehold on monetary power.
But as also stated, these moments come and go. This, too, shall pass.
And the legitimate coins and projects that aim to find real world use cases and serve as counterpoint to the hollowness of fiat "full faith and credit," which is also being slowly exposed for its Ponzi-like piling of debt upon creaking debt structures, may yet survive to lead the way toward legitimacy in our chaotic monetary world.
Investing responsibly in these surviving assets, while keeping an eye on risk from the Do Kwan/Enron type imitators that will always appear in speculative markets, is still, IMO, appropriate for speculative investors here amid the opportunity that the crypto correction of 2022 is providing.
And that is what RLCM is endeavoring to do for its crypto clients.
Richard Lees and clients of Richard Lees Capital Management may be long cryptocurrencies mentioned in this article. Clients invested in any of RLCM's managed digital portfolios have undergone thorough risk evaluation to deem these investments appropriate for them, as should anyone considering speculative investments. A quick questionnaire about risk tolerance, like the one below, might shed light on such a tolerance: