Crypto: The Good, Bad, and the Ugly

January has been nothing short of a crappy wooden rollercoaster ride at an old theme park on a 100 degree humid day. Here, I will breakdown some personal concerns on the crypto market as a whole, where we go from here, and what to look or in the future.

The Good:

Despite news regarding the Tether subpoena, Facebook banning crypto and ICO ads, numerous ICO scams uncovered, and even the SEC freezing an ICO’s assets, the crypto market has not completely crashed. In fact, it has held quite strong mainly due to the community as a whole. HODLing remains the motto for crypto.

The Bad:

We are not out of the woods yet. The ticking time bomb that is Tether has yet to come to fruition. The subpoena is only the first step in what I foresee as a lengthy investigation that will cause major dips throughout, as more news comes out. Tether will eventually be exposed. Does anyone really believe their statement regarding the audit?

“We confirm that the relationship with Friedman is dissolved. Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame. As Tether is the first company in the space to undergo this process and pursue this level of transparency, there is no precedent set to guide the process nor any benchmark against which to measure its success.”

A cash audit is not difficult and in fact should be quite easy. This whole thing stinks of fraud. Tether could easily dismiss the FUD, yet they leave many important questions unanswered. Ask yourself why.

Best case scenario is they do in fact have 1:1 backing by USD. Worst case scenario is that it is a huge fraud and they have been manipulating the price of Bitcoin for the past year or more. I fear the latter may be true, which we all know would have a significant negative effect on the entire crypto market.

The Ugly:

My concern does not stop at Tether. Most of us are captivated by the idea of holding a coin that will one day moon. We are also willing to hold long term to see it happen, but there’s a huge problem that very few seem to realize. Very few coins have 1) actual utility and 2) a way to produce revenue. Some have one or the other, but few have both. Many projects are simply taking current technology, slapping “blockchain” on it and calling it the next big thing. None are being used as true currency since the entire market is so volatile. Quite simply, the only reason we are investing in a coin is the possibility that it will one day be worth much more than we paid for it. If you are in crypto, this seems like a viable prediction, but outside of us, the rest of the world sees this as a huge red flag and stays out. Without new money, the market cannot grow.

We treat projects as if they are small companies, but if that is true, who are their customers and how do they make money? Investors are their customers and their revenue comes from selling tokens/coins. Anyone else see the problem with that? It’s a circle that starts with you investing and ends with the “company” profiting from your funds. That statement describes a vast majority of projects.

On the flip side, there are some projects that do in fact produce revenue from actual customers using their platform. Like it or not, Ripple is at the top of that short list.

I personally stick to investing in platforms, protocols, and projects that have a model for producing income outside of its own investors.

This is not financial advice and I am not a financial planner. These views are my personal opinions only and should not be taken as financial advice.