Cryptoland and its “Lehman Brothers” moment: Weren’t we supposed to be different?

Cryptoland and its “Lehman Brothers” moment: Weren’t we supposed to be different?

What happened to us? Crisis in paradise, when we were supposed to be better. Let’s talk about errors and solutions.

The constant and frantic promotion by the participants has created a kind of cult. An irrefutable credo has solidified in the minds of many: The trend is always up. The volatility is temporary. This dogmatic optimism leads to delirium. Consequently, prudent risk management is seen as a sign of foolish pessimism.. What risk? “The only risk is not investing in Bitcoin.” “Bitcoin is a safe haven.” “He who does not sell, does not lose.” “Hodl”. In other words, the crypto community is making the same old mistakes. No bug here is new. This is the same pathology that created the dotcom bubble and the mortgage bubble. The illusion of invincibility. The illusion that nothing can go wrong.

Revolutionaries always promise better results than the established elite. In cryptoland, the idea is always being sold that some kind of libertarian utopia is being built better than the current evil system of governments and banks. Bitcoiners always talk about the role of banks during the 2008-2009 crisis. They always talk about the financial crisis in Cyprus and the corralito in Argentina. “Bitcoin fix this”. Nope? Alex Mashinsky, CEO of Celsius, was at every conference and every event wearing his T-shirt with the phrase “Banks are not your Friends”. Alex promoted, promised and predicted. “Bitcoin will hit $100k in March 2022,” he said in a debate with Peter Schiff. “Jeff Bezos, Warren Buffett, Steve Jobs… They all ask for credit using their assets as collateral.”

  • Beyond the obvious: Why is money not what we think?

During the housing bubble, people used their real estate as collateral thinking that the market would go up forever. That irrational optimism led them to take a lot of risk. It never occurred to anyone that real estate prices could drop substantially. Back to the same. bullish trend temporary volatility. Under such conditions, credit is easy money. A debt in fiat is assumed to acquire an asset rising in price. I mean, enjoy today. It is paid tomorrow with the profits. In this context, the risk is usually lack of liquidity. In other words, there is not enough monetary stability to be able to respond with obligations in the event of a too violent fall in the price of collaterals.

What happened during the housing bubble? The right blamed the Federal Reserve for printing “money out of thin air.” The left blamed the lack of limits and regulations for banks. Both sides, however, agree that corporate greed, political leniency and public naivete played a role in the crisis. The safest thing is that everyone, to some extent, is right. Such collapse rarely has a single cause. Nevertheless, That core can be summed up as follows: A lot of debt. A lot of risk.

Greed makes you reckless, because it blinds you with delusional optimism. People bitten by this mosquito suffer from a false sense of security. They overestimate their analytical abilities. And they think they are too smart to fail. During a boom, most think the market will go up forever. Confidence in the future is infinite. Like Icarius, the eternal bulls think they are invincible. Sounds familiar?

  • How to deal with a bear market?

Miners, exchanges, the press, funds, and venture capitalists all know full well that the rogue business sells big. We have the case of Celsius, for example. What was Celsius doing? He took money from his clients and offered extremely attractive rates. But in order to offer such rates they had to take many risks. However, this is not what was said in public. Celsius was depicted as a hero of the revolution. The good guys fighting the banks. In practice, however, it functioned as an unregulated bank.. Which implies that the funds were not insured. They did not have enough liquidity. And the possibility of bankruptcy was real. The real losers, of course, are Celsius customers Long live the revolution!

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Of course, this community unfortunately is not very supportive of the fallen comrade. The default custom is to blame the victim. Many of the people who have lost their savings in the fallen Lehman Brothers projects of the crypto ecosystem at this time, the only form of support they have received has been an “I told you so” and an outdated speech about personal responsibility. The considered noblest alternative is to put the money under the mattress. In other words, self-care. The response of many to this crisis has been to “buy the drop” and “keep your keys.”

One would assume that after such blows, the market would gain a bit of humility and perspective. But I would dare to say, from the things that are read on the networks, that we are not yet at that stage. There is still a festive tone in the tweets of many of these so-called influencers. Icarus still flies happily through the skies trusting in his indestructible future. Ironically, Wall Street is currently showing more sobriety, prudence and restraint than cryptoland. This state of denial could be indicating to us that there is still a lot of pain ahead.

Suddenly, we need a much more tragic and unexpected setback in order to realize as a market that overconfidence is counterproductive. Every investor needs to manage risk. Every investor needs some monetary stability in their portfolio. A mature market accepts the possibility that prices may go down. And accept that recovery may take longer than expected. It is not a matter of being pessimistic or bearish. It is a matter of investing sensibly and strategically, without falling into false expectations.

To do? act responsibly. Everyone has the right to fall in love with their favorite asset. Idolatry is free. However, everything has its limits. This market also has to think about the investor. If we know that hard times are coming, it is best to give the best advice. For example. Has the S&P 500 already gone down what it had to go down? No, most likely the floor is lower. When will the recovery begin? When will the all-time high be reached again? We do not know yet. So it’s best to act very cautiously, because bear markets that coincide with a recession tend to last longer.

  • What does Warren Buffett (really) say about Bitcoin?

Like the little ant in the grasshopper fable, investors are now hoarding cash in preparation for winter. Portfolios are being reorganized. Debts are being restructured. Liquidity is being accumulated in order to survive what is coming. This is not the time to buy like crazy. Therefore, many investors are on the lookout for more clarity.

What would happen if Bitcoin goes down 50% more? How’s it going? If we don’t come out on top in this hypothetical scenario, we’re doing something wrong. The time has come to take preventive measures. What would happen if my favorite platform went bankrupt? How much money do I lose? If the risk outweighs the benefit, it’s not worth it.. It is best to move those funds to safer places. We are best when we listen to the best angels of our character. Greed, on the other hand, makes us take more risks than we can really tolerate for fear of missing out. Personally, I’d rather ask for opportunities than lose my money.

Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.

It may interest you:

  • Beyond the obvious: Why is money not what we think?
  • How to deal with a bear market?
  • What does Warren Buffett (really) say about Bitcoin?