bubbles and the biggest of the too big to fails

in LeoFinance2 years ago

Do you think the governments thought they would lose the game of intelligence gathering? Well, perhaps they haven't, since they leverage the collectors, but I wonder if a half century ago they would have predicted that the largest data collectors would be global corporations that have no real product. Do you think that at the birth of the modern internet, people predicted that the biggest money spinner would be the companies that sold nothing?

I don't remember it all well, but back in the days of the bubble, it was the "e-commerce" sites that looked to be the future money spinners, with the focus being on individual site experiences - like specialty stores. What eventuated was more like malls though, platforms that gathered all the retailers together, like Amazon does.

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What tends to happen though is that while all the big players in a burgeoning industry tend to think that they know the future, it doesn't always work out as planned, with investors wearing the costs. Crypto and blockchain is a new industry, but I wonder if it is a bit different in some respects, because while it is new, it is playing a very old game - economics.

So far, we have seen Bitcoin (as the best known crypto) be ridiculed for years by the finance industry that it is entering into, an industry that is assumed is too big to fail, since it is a macro industry that touches all, an umbrella that covers and interfaces with all other industries. The idea of Bitcoin surviving, let alone being successful enough to warrant investment consideration was laughable not very long ago - and is still being treated as a joke by many, although, more and more with a nervous laugh trailing close behind.

If history has taught us anything it is, nothing is too big to fail. Every empire, nation and company will eventually fall, but we as a community will endure, until we don't. Crypto is like Google, a trendy little search engine that does nothing more than help connect buyer to seller - until it did it so well that there was little option that could compete with the market penetration it had.

While most of us understand the dangers of the centralized power Google, Facebook, Amazon, Apple and Microsoft hold and exercise, people are starting to learn that crypto is different because of the ownership factor, the decentralized nature of the operations and governance. Does this change the future?

If we think about economics as we have known it in regards to the financial systems, all of the governments, companies and investment firms that back them all are counting on the economy as we know it surviving and will obviously do what they can to ensure it. However, if we take the everything fails approach, it means that eventually it has to come to an end, but being what it is as the pervading umbrella, there has to be a replacement for it, with whatever replacing it absorbing the value and potentially generating what it cannot.

The system in play at the moment can make a small handful of "users" extremely wealthy, but the other extreme is that to do so, it will inevitably make a far greater percentage of users increasingly poor. This doesn't mean the poor have necessarily worse conditions than earlier at a practical level, but relative to the rich, the gap grows ever larger. At some point, the entire system becomes untenable as there is no more to squeeze from the bottom and the top retracts.

However, due to the practical nature of economy, we are more likely to see some kind of "revolution" before that inevitability comes to fruition, which means that there will be a forced retraction driven by mass migration away from the suffering. The migration of the masses will be to increasingly move their wealth out of the traditional economy that is restricting them and onto the blockchains where they are owners themselves, not just users. With demand driving supply, the supply will have to also make a move onto the blockchains to chase their customers, which starves the traditional economic pathways of activity and volume.

Investment companies want to make value, so at some point they will have to make a forced decision - do they keep investing into the companies on the old system, or do they follow the where the customers of those companies are moving by investing into blockchain and crypto facilitators? The more they umm and aah about it, the higher the losses on one side, the lower the gains on the other - decisions, decisions.

Back to the "collapse"

Of course, the era didn’t end disastrously for everyone. Between September 1999 and July 2000, insiders at dot-com companies cashed out to the tune of $43 billion, twice the rate they’d sold at during 1997 and 1998. In the month before the Nasdaq peaked, insiders were selling 23 times as many shares as they bought.

So, who ended up holding the bag? Average investors. Over the course of the year 2000, as the stock market began its meltdown, individual investors continued to pour $260 billion into US equity funds. This was up from the $150 billion invested in the market in 1998 and $176 billion invested in 1999. Everyday people were the most aggressive investors in the dot-com bubble at the very moment the bubble was at its height — and at the moment the smart money was getting out. By 2002, 100 million individual investors had lost $5 trillion in the stock market. A Vanguard study showed that by the end of 2002, 70 percent of 401(k)s had lost at least one-fifth of their value; 45 percent had lost more than one-fifth.

This was the real ecommerce.

Massive wealth transfer.

The crypto market is a tiny speck in the world of finance. Fucking tiny. There is an enormous amount of money out there which is held by people wanting to "make bank" and they will do it at any cost. But, maybe they are walking into an investment trap as the bubbles they like to inflate, pop and then walk away from have a little more visibility involved, some traceability and some transparency. Plus, it isn't localized to a nation, it isn't owned and operated by a government, it isn't controlled by a company.

Too big to fail is the case when it comes to centralized systems - but decentralized systems are robust and perhaps at times, even antifragile. A nation can fall, but the cities continue on, an empire collapse, but the citizens live, a company fail, but the employees move on. Humans, even in a community are always somewhat decentralized and as such, are better able to fork with conditions and adapt to a new way of life. Centralized entities can't and the bigger they get, the less mobile they become, whereas a decentralized organism becomes more mobile the larger it becomes.

For me, it is interesting to think about what could happen, but there is no guarantee anything will happen. What I am quite certain about though is that all of these engineered economic events that continually bleed the bottom to feed the top will eventually cause a catastrophic collapse as the foundation they rely on crumbles. The current economy is narrowing the selections by reducing the ability to participate to the point where the entire thing is a single point of failure - and it will.

[ Gen1: Hive ]

Posted Using LeoFinance


I sometimes wonder which 'to big to fail' sector will have the first casualty. The easy answer is banking because it is so predatory that no bank will come to the rescue of another. They will just wait to pick the meat off the bones when the competitor fails.

Will it be another mortgage crisis? It's sort of shaping up that way with really big unemployment and small business failures. Could be a small manufacturing crisis. There is an incredible pile of money (or more honestly, theoretical money) backing loans that could be in deep shit right now. My brother told me that the relatively modest Credit Union that he works for offered to defer payments and interest on 4 billion dollars of loans in June. That program is ended right now.

My brother is not a banker that laughs at crypto. He doesn't consider it investment grade yet, but actually has some real world knowledge. When he calls me and tells me that he bought his first BTC I will officially be in fear for the banking industry.

The banks are happy to eat themselves, thinking that we have no other options available but to rely on them.

In the post there is a link to the world money in chart (a few years old). The derivative market is insanity.

Let me know when he buys ;)


Thank you for your engagement on this post, you have recieved ENGAGE tokens.

I wonder how many of these hot-shots will be pulled from their beds in the middle of the night at some point in the not too distant future, and guillotined by a mob.
Do you think that possibility factors into their thinking, or do they assume the police will always be around to deter it?
When the money dries up and the pension funds fail and the cops all quit, and there's still a wikipedia page about them. When they're doxxed online by the children of a man who killed himself after his life-savings were wiped out.
That doesn't sound like a comfortable retirement.

Do you think that possibility factors into their thinking, or do they assume the police will always be around to deter it?

I think at least in the US where in some places it is apparently "we will not protect property or those defending property" from the police, they are probably starting to worry. Problem is, mobs are retards too.

It is going to get pretty bad I think - and crypto islands will look pretty good for some.


This is cool - nice one!

all of these engineered economic events that continually bleed the bottom to feed the top will eventually cause a catastrophic collapse as the foundation they rely on crumbles

Wonder what "their" exit plan is/

Or are "they" dumb enough that they will actually be astonished when it fails and wonder how that could possibly have happened because this time they were smarter and knew better than their predecessors who were doing the exact same thing? :D

They don't really need an exit plan as what they do is bleed and buy. They take the money, buy generative assets and stores of value which injects the money back into the economy to add more inflation. They think that it will last though.

Now THAT is an interesting concept!

The persistent nature of humanity allows blockchain finance to supersede traditional systems - as the once enigmatic concept of crypto proves itself inextricably linked to each individual person through the true ownership of all, indispensable without the abolition - the expiration - of humanity itself.

Thanks for another awesome post!

Yeah, I see it that at the moment, we see ourselves as outside of the economy, not as the economy itself. This might even be by design to makes us feel like we do not have control over the economic conditions.

My mind is filled with video reel images of a dystopic future because of your post. Got some crazy stuff going up in my head! :) Thanks.

How can you protect a blockchain from a 51% attack?

I don’t think you can.

I think the thing that protects it is the ability to not be tied to it. We saw the protection mechanism in play when Hive forked away. Every currency lives and dies on usage and some level of trust.

The same thing can happen to hive, so the solution is to fork to another coin every 3 years.

There will be no stability

Do you think that J.Sun would be keen to try it again?

I t could happen, but eventually the attackers will realize that the value is in the community, the user base, the applications they build and play with - attacking it kills the value, it doesn't win the hearts and minds. It is far too costly and if the industry keeps growing, it becomes increasingly expensive.

At the low Ned sold for 8 million, at the high that same stake was 640M worth. Hopefully 3 years from now, the floor makes any attack very expensive and the decentralization would mean many would have to sell. Essentially, an attacker would end up holding a very big bag of nothing.

Yes I understand the point about community and about the app developers, and that is what happened.

Just pretend hive had to fork again for what ever reason, how motivated do you think community and developers will be to repeat the work to move.

When a fork gives a free coin airdrop, some people may welcome a hard fork just for the windfall.

I think many wouldn't be keen, but they would do it. It is harder now though of course, as there are checks and balances in place. A 51% attack isn't buying Ned's stake and convincing exchanges to power up (well after the coming HF for the exchanges).

The question will really become what is the point to attack, since there are no resources that need stay?

Some people would like the windfall, but that ends too once it becomes so common that there is no value, so eventually attacking becomes useless because it can force a fork, but there is also no windfall for the fork other than freedom - so both sides look to maintain and generate value on the chain. Once the ecosystem is large enough, it becomes very, very expensive to attack, so why risk it?

When I was teaching, I used the Britannica Enciclopedia - Encarta - Wikipedia case.
Those old enough will remember how Microsoft wanted to enter the Enciclopedia market and tried to negotiate with the biggest player. Britannica answered with a prepotent NO as they were the best Encyclopedia of the world (centralized) and Microsoft, although a good tech company, knew nothing about the encyclopedia business. Gates bought a small unknow company and created its product. Britannica became bankrupt a few years after. The technology was great but Microsoft still was a centralized company and tasted the same medicine when Wikipedia took the place of all packaged encyclopedia products as they could not compete with the decentralized model Wikipedia introduced. Encarta ended as a product quite fast.
Nothing can compete with decentralization if it is well conducted and with blockchain and monetary value, decentralization is even stronger.

The strength of nature is its decentralization, even our genetics is decentralized to some degree to protect us and allow us to cope in a a wide array of conditions.

Side note: We had a set of World Book Encyclopedias from the 60s when I was a kid. Can you imagine reading a printed encyclopedia for knowledge now?

I sometimes remember copying the content of the encyclopedia to do my homework from school. It is amazing how things have changed. I also remember how my kid who will start college in a few weeks, was at third or fourth grade a few years ago, we bought him a dictionary he had in his room. One day, helping him with his homework I asked him to look for a word in the dictionary, and he took the iPad and checked the dictionary there. I was shocked as I had never thought of looking for a word on the computer just because I had never looked for words anymore since I was a kid. I then realized how everything has changed.

The encyclopedia was "the source of truth" when I was a kid.

I like the online disctionaries - even better is the thesaurus and better again, :)

The last correction of prices in the cryptocurrency market is almost correlated with the similar correction on stock exchanges. I don't know why, but I don't like this connection. I do not want to believe that the cryptocurrency market is already governed by those who manage stock exchanges.

Keeping eggs in more than one basket is always a good solution, only that too many fail to see this early on. And those who do... Cash in even when everything else around fails. The power of a long term vision.