It’s an open secret that there is a large amount of fraud in the cryptocurrency space. From explicit scams to weird convoluted “bugs” placed into smart contracts that magically get found soon after their creation, enabling “mysterious hackers” (the people who wrote the smart contracts) to drain millions of dollars from said smart contracts, cryptocurrency has a well-deserved reputation as being linked to criminals and other people of low moral character. This is not really the topic of this essay and is not really meant as an insult against cryptocurrency, but rather a short objective overview of the space and the way it is viewed by those outside of the space as well as those interested and participating in cryptocurrency markets who have retained some objectivity.
I have been extremely interested in cryptocurrency since I first hear about it back in 2013, even going so far as to be actively involved on the BitcoinTalk forums, various IRC channels, and even a few very early proof of stake and stablecoin projects. As time has gone on, I’ve watched the space evolve and become more complex in terms of technical capabilities, but also devolve and largely become the domain of people who would otherwise be selling multi-level marketing courses or becoming lifecoaches in hopes of turning a failed, wasted life into something successful. While this last observation is a bit of a direct insult, I am still very interested in cryptocurrency as a technology as well as its impacts on the world as a whole.
With the two prior paragraphs out of the way, I will now get to the meat of this essay, which is that I suspect the implosion of bitcoin as well as the entire cryptocurrency space may be a few years or a decade out, at most. This implosion is not because I see bitcoin or cryptocurrency as a whole as technologically unsound, but rather because of what these technological systems will be displacing if they succeed: fiat currency and the masters of fiat currency.
If there is anything I have learned over the last decade of creative and entrepreneurial endeavors, it is that reality is rigged to an absurd degree. There are proles that make it big, creatives that make it big, people who are not born into wealth who make it big, but these are generally exceptions that prove the rule. The entire social situation in America is one of illusionary freedom. You can do what you want and say what you want as long as you have no influence or reach, but once you start getting influence and reach you find yourself surrounded by gangsters and corrupt nodes of authority that will essentially knock you back to square one and force you to start all over unless what you are expressing is already in line with the regime in power. The “dominant values” of society are only dominant because anybody who does not agree with them who is successful will find their reputation libeled, their ability to participate in social platforms repeatedly taken away, and sometimes even thrown in prison or all their assets seized by the federal government. This sounds hyperbolic but it is not, I know multiple people who have not done anything wrong who are now unable to use the banking system or access their cash, or have been charged with federal crimes they are not guilty of but will still end up in prison as a result.
If the social scene in “the first world” is so rigged and corrupt, I have no doubt that the financial scene is rigged and corrupt to an even more extreme degree. The free and open internet was a real thing and promising thing until the free and open internet began to displace the influence of establishment institutions, now the free and open internet is more of a joke phrase than any sort of thing that exists. It is my opinion that bitcoin and cryptocurrency will eventually suffer the same fate once they become a real threat to the institutions that issue and control money, because the institutions that issue and control money simply derive too much power from said activities to let themselves get replaced.
It has long been theorized that central bank digital currencies, or CBDCs, are planned. This makes sense to me, as everywhere I look it appears that traditional currencies are being gangbanged and abused to the point where it seems the people running them are not really planning on keeping them around for a long time. CBDCs are not really an improvement over traditional currencies, they are just digital versions of rigged games that, in their digital form, will make taxation and tracking as well as other mechanisms of social control (UBI in exchange for following arbitrary rules and guidelines that are related to social behavior) much easier. CBDCs are essentially the same old system of control, upgraded to a degree which will further cement existing power structures.
CBDCs are technologically inferior to cryptocurrencies. They will inflate and contract and dance to whatever tune the people at the helm of them decide to play, whenever they decide to play them. Cryptocurrencies are filled with fraud and scams and seedy characters, but the ones that end up lasting long term will generally be straightforward and honest in how they function. This straightforward honesty is a flaw, not a feature, for the people at the top of the hierarchy. The people running things, the people with armies and more money than God, are not interested in playing a fair game – and why should they be? These people have all the power, all the influence, and all the money flowing in their direction. The game that the truly successful play is not a game of winning anything new, but rather the game of ensuring they never lose anything they have, which is everything.
For the reasons stated above, the implosion of bitcoin and cryptocurrency as a whole is most likely inevitable at this point. Whether this implosion is in five years or twenty years or fifty years is not clear to me, because I think this implosion – more accurately a controlled demolition – will occur not based on time benchmarks, but rather influence benchmarks. Once cryptocurrency is successful enough to the point where it represents a genuine threat to any sort of established power, once crytpocurrency has swallowed up enough capital that it is many multiples larger than it already is, then it makes sense to me that various governments and legal arms of those governments will swing into action to a degree that destroys the original dream of cryptocurrency, which is decentralized exchange of value in a secure and verifiable manner not relying on any country or country’s leaders in order to function.
How will bitcoin and cryptocurrency be demolished? The farther out the demolishing, the harder it gets to predict in terms of names and specifics, but the most likely demolishing seems to me to be related to fraud, more specifically Tether. Another fairly open secret in the cryptocurrency space is that Tether, a stablecoin pegged at 1USD per coin, is most likely completely fraudulent. Every time there is a flash crash in bitcoin, billions of Tether are magically summoned into existence. This is most likely used to buy up bitcoin and other cryptocurrencies and prevent a chain reaction of liquidations which would implode bitcoin and the entire market.
In my opinion, this is what’s happening with Tether and things like Tether: the cryptocurrency markets are purposely being inflated and secured in a fraudulent manner. Bitcoin is essentially being propped up and “cushioned” by imaginary money soas to prevent it from going through natural boom-bust cycles which would allow it to be fundamentally sound. Tether is being “baked in” to the cryptocurrency scene to a degree that is scary, as the more it is a cornerstone of cryptocurrency, the more the overall health of cryptocurrency is contingent on Tether not being fraudulent – which seems to be an increasingly absurd proposition.
At a certain point, the USD’s inflation will increase to a degree which is untenable. Most first world economies are already in seeming death spirals, but we are in the calm before the storm. When things get really genuinely bad, a point we are nowhere near, money will increasingly flow into bitcoin and cryptocurrency at a breakneck speed. This will create a feedback loop of these things gaining in value and becoming increasingly seen as an escape for people who see no other escape. At this point is when I suspect a controlled demolition of cryptocurrency will take place.
When it looks like bitcoin and cryptocurrency have succeeded in supplanting traditional power structures, that is when I think the fatal blows against bitcoin and cryptocurrency will be delivered. Tether, the cornerstone of decentralized finance, will be imploded and panic will set in with its implosion. Bitcoin and the entire cryptocurrency market will enter freefall and make many seemingly rich people into definitely poor people over night. Many people who put their capital into crypto as a means to protect their savings will wake up to poverty.
The human interest angle of the implosion is the most important aspect of this whole process. There will need to be lots of carnage, lots of proles who have lost all their money, lots of despair and confusion, lots of weeping and gnashing of teeth. The reason this is so important is that there needs to be some “disaster” or “tragedy” that is so vivid to the average person that the average person becomes supportive of bitcoin and cryptocurrency as a whole being shut down and banned in a legal manner. The fact that markets are things completely different than the technical aspects of bitcoin and cryptocurrency will be obfuscated and lied about, and the human misery of the crash will be highlighted and focused on until it is illegal to participate in cryptocurrency. Once this is all done, then CBDCs will have no competition and the people at the top of the societal hierarchy will continue their reign of terror and abuse unimpeded.
This is all speculative and just my opinion, but it is the path that makes the most sense to me as far as cryptocurrency goes. I hope that I am wrong, that this is all the product of an overactive imagination, but I don’t really see people with power over finances giving up their power over finances. Life experience has taught me that games are rigged and generational success is something that is not allowed for most of the population. This is not to say not to participate in speculation related to cryptocurrency, I will continue doing so as if I don’t believe what I have just written. It is better to behave as if life is not rigged and success is directly correlated to hard work, even if both of those things are not true at all, because the alternative is to dwell in despair and hopelessness.