People Have No Clue What’s Going on With Crypto

As of today, Bitcoin has fallen from his glorious high of $20,000+ just a few weeks back down to a more modest $13,000 (just Google the current rates). So far so good?

Accept That You Are Completely In the Dark When It Comes to Cryptocurrency

Let me tell you something interesting about cryptos: no one understands how they work. Not the Wall Street Journal, not the Economist, not the Financial Times, and certainly none of those people working at CNN, NBC, CNBC, or Fox News who can’t even wrap their heads around the phenomenon of memes. Hell, most of the coins are based on some software released by some random, anonymous Japanese dude known as Satoshi Nakamoto.

“Nobody” is probably an exaggeration, but you get the idea. Neither you, your friends, or myself know what is going on with cryptocurrency and whether Ripple (XRP) is going to the moon while Bitcoin (BTC) and Litecoin (LTC) tank simultaneously - which is something that’s actually happened recently. I’m not kidding, just take a look at the Ripple homepage and you’ll understand that the front-end coder was going for the killer sell on hype and aesthetics, not the practicality of the coin.

Figure 1: When your head is so far up that you think Ripple is superior to a “payment structure built before the Internet” (read: physical Cash).

Guys, “today’s payment rails don’t cut it.” Try reading that straight nonsense to yourself and yourself deep down inside if you have any speck of an iota of what that means. Those overlapping hexagons with the words “slow, expensive, unreliable, and unacceptable” are really convincing me about while Ripple is superior to LTC, BTC, and even Cash. What? People can’t wait 3-5 days now for their payments? I’m not sure about trying to criticize any form of physical currency for being unreliable either. Ripple is so volatile that it defines the word unreliable. If this wasn’t the Ripple homepage, I’d think it was satire. Also - what about the other 4 billion people not connected online who need to make transactions, the page literally is saying that less people are connected online than offline. You really have to wonder which incompetent manager hired this clown designer.

Figure 2: The stability of Ripple from Poloniex. Unprecedented 24-hour volatility - look at that spread.

Crypto Fever Mirrors the CDOs of the Past

All of it is hot air and you’re probably, no, definitely wrong if you think you know some sort of trend that’ll occur in the market for certain. The only way you’ll make money off Bitcoin is if you’ve jumped on early by luck and jumped off at the right time, or if you’re some individual with a lot of connections and you don’t really care for the corruptness of trading on the basis of insider information.

Hammering the point home, the people putting together the documentation for altcoins like Ripple, Dogecoin (DOGE), Monero (XMR), and Zcash (ZEC) or some even more esoteric vanity coins that you’ve never even heard of like Siacoin, Storj, Augur, and Burst have absolutely no idea what they’re doing. People are literally pulling up dictionaries and looking up the rarest word they can find and minting their new, shiny cryptocurrency to market.

They’re like the methamphetamine cooks who don’t have a chemistry degree and who crush up a bunch of Sudafed cough pills and mix it together like they’re following instructions out of a cookbook without understanding any of the why or how behind the chemical processes are occurring.

That’s exactly what these people are doing, and it doesn’t take an expert to see that future prospects aren’t good for any of these coins as soon as people start to lose interest in them. There’s a number of factors to consider for why people might realistically lose interest:

There’s a recession or some sort of economic downturn that happens cyclically in the United States and, to a lesser extent, globally, every seven or so years. Just think of the past recessions of 2001 and 2008 and you’ll get the picture. Look at the list on Wikipedia of recessions in the United States during the past 20th century. It’s a dangerous time to be trading (again) and investing in something we don’t understand fully.

You Don’t Understand The Implementation of Bitcoin If You’re An Average Joe

I guarantee the math involved in the original paper is completely over your head. The following is an excerpt from Satoshi Nakamoto’s original 2008 paper, and I bet most of you have no idea what a Poisson distribution is why there’s C code involved. Further, the paper’s been out for ten years and plenty of even more complex variations have sprouted out of this initially complexity.

Figure 3: An excerpt from Nakamura’s original paper.

Sure, if you have a math degree you might be able to understand the basic aspects of Bitcoin’s implementation, but what happens when you involve the calculations for the optimal trading strategy or the introduction and mathematical reasoning behind why Litecoin or Ripple transactions are faster. What about trying to understand newer cryptocurrencies like B3 Coin? Getting your information from a news source? Sorry, they don’t know either, or else we’d all have been Bitcoin billionaires by now.

Written by richardkyu January 5th, 2018