If I were a gambling man...

tarazkp (85)in LeoFinance • 4 years ago

Out of curiosity, how does reading headlines like the one below make you feel?

Does it fill you with trepidation, or confidence in your position?

While I agree that crypto investments should be met with caution for a number of reasons, I also think that what many of the traditional advisors are missing is that for most of the younger generations, traditional investments are out of reach and will increasingly be so, which will mean that as we go forward, less and less money from the younger market segments will be pushing into traditional stocks to prop the prices up. What happens to those who have their wealth tied into the traditional economy when this starts to take effect?

Currently, only a tiny sliver of the global wealth is in crypto, as the 2.5 trillion market cap represents - which is only 1% of the global debt that sits around 250 trillion, with the US holding 28 trillion of that debt itself. By the way, the global debt is over 3 times the global GDP - good luck with that.

Yet, these kinds of numbers become meaningless in our every day lives and we make the assumption that smart people like the Governor of the Bank of England is on top of matters, so the economy doesn't come crashing down around our ears.

Nice one Bruva.

Yes, there are risks involved with investing into cryptocurrencies, but there is a bit of a difference in affairs as - we are gambling with our own money, while what is happening for the majority of other investments is that it is being manipulated by people playing with other people's money and when it does crash, there s no cost to the gamblers, the cost is transferred and incurred by the common people, many of whom have never come close to investing for themselves, many who have no investment position at all.

Not having a position in the markets doesn't stop a person from paying the price of the crash, as jobs will be lost, houses will be lost, families will suffer.

The thing is, that for most in the economy, the only benefit is hoping that there will not be a crash that costs, but there is no actual increase of personal wealth or opportunity. Essentially, one is exposed to all of the downside, with no position for any upside. You can lose, or you can stay static, which will be a slower loss due to inflation and the increasing drive of automation that will cost jobs continually moving forward.

While the people of the past were able to benefit from high interest rates on their earnings and a culture that encouraged saving and investment, we are now living in a time where saving is penalized and a culture that is driven by consumerism and mass spending. Because the beneficiaries of the current climate have already built their position in a more favorable past, they have very little threat to their position unless consumer sentiment changes.

But, they are gambling that it won't change, but they are now getting a little concerned.

"Banks have been forced to take a hard stance against the growing trend, which poses a very real threat to traditional economic systems as more and more people elect to buy goods and services with decentralized currency."

Banks do not care about the odd person losing their house, as long as long term, the bank profits are up, which they almost without variation are, because they literally print money. But, they do care if the average person starts to choose alternatives than the traditional economy, because this will draw value away from the banks and distribute it in circles that they do not benefit from. At some point in the near future, people will be looking to DeFi smart contracts for their housing loans and be paying their interest (without the overhead costs) to millions of participants, just like them who have their wealth in a pool. What do the banks do when they can no longer benefit from things like fractional reserve lending?

A lot of people pit crypto against the traditional economy as a David and Goliath battle, with many seeing Goliath as the banks and tipping them to win. The thing is, the economy is driven by consumer activity and the vast majority of the value of consumer spending is from the average person, the 99%. When looking at the battle of economy, we have to look at it from the transactional mass perspective, the value that is moving. The value that is stored is only valuable when what it is stored in still has a demand associated with it. If people stop wanting gold - gold is valueless.

If, the younger generations are not going to be able to enter into the workforce, how are they going to be able to feed value into the traditional economy to keep retirement funds afloat? If they are unable to earn enough, how are they going to consume at a high enough rate to keep these overinflated markets from bursting? If more of them choose to barter between themselves rather than use the host of middlemen skimming fees, what happens to the transactions in the traditional markets over time? What happens to the new economies?

Those who control the traditional economies have been proxied through activity by the consumer Goliath in exchange for opportunity to work, stability of society, well-being and the chance to live a life of value. Their results are becoming more and more volatile, not because of crypto, but because they have overextended their extraction model to become so efficient that the consumer can no longer keep propping it up, so they keep handing out more and more in order to keep the merry-go-round turning, continually borrowing debt on the future, to be paid by the very same consumer group who are getting the handouts now. It is wholly unsustainable, yet most of the world is backing it as the winner - since they keep supporting it, no longer how many times it fails to deliver.

Yes, cryptocurrency is currently all about speculation, but every economy is about speculation o how consumers are going to behave in the future. You buy a stock in a company hoping that the consumer will want to buy the product and, every other specualtion is derived from the basic rule of supply and demand. When what is supplied is not demanded, it has no value, when it is in high demand, value increases.

For a very long time, the consumer had no choice to be anything but a consumer, but that has been changing as the investment vehicles are looking to capture more wealth to extract more value and drive it to the top, which it has effectively done. However, it was never expected that a rival system would be brought into existence to challenge the current conditions and while it was seen as a joke, now those in the know are concerned about where it leads. They don't know what happens, but they do know that the system they benefit from is at risk, so are going to look to defend it the best they can.

Some people will indeed lose all of their money - but does it matter if that money has no demand on it and they hold crypto instead? Perhaps the biggest risk to personal wealth is exposure to the traditional economy itself, the one that only has intrinsic value because we keep using it. If enough start to shift their attention to the alternatives, that exposure could become very costly and as it has always been in the past, it will not be the institutions left holding the bag, they will raid the wealth of those who trusted them to make sure they get out, scot-free.

What kind of gambler are you? All in for the win, or a bet each way?

Taraz
[ Gen1: Hive ]