- Naseem believes the crisis is not a liquidity crunch but a cash flow.
- Bill Gates said cryptocurrencies are based on “the greater fool theory.”
- The industry failed to produce anything “remotely capable” of generating cash.
Cryptocurrencies are going through a very rough patch. Lately, crypto winter has started. Terraform labs collapsed, followed by the infamous FTX saga. Major mining companies are suffering to survive amidst high energy prices, low value of the mined currency, and increased difficulty levels. All this combined has put a very bad name on the industry, people are not trusting the once lucrative institution, and an influx of withdrawals in almost all major exchanges and companies created a liquidity crunch in the market.
An event that is unlikely to reoccur, a once-in-a-lifetime kind of event, is called a black-swan event; the FTX saga is considered such an event. Although the author of the book, “The Black Swan: The impact of the highly improbable.” Nassim Nicholas Taleb has some reasons that could be behind the sorry state of cryptocurrencies.
The Lebanese American intellectual agrees that the industry is in a crisis, but only due to a lack of cash flow.
The asset’s market price is not a big deal until the company can generate enough cash flow. And despite all the hype created, the industry miserably failed to produce anything remotely useful to generate a cash flow. The income in the industry is circular crypto-to-crypto, with some suckers in between.
Bitcoins do not generate any profit or cash flow for their buyers; this forces people to believe that speculations purely drive the industry. Not a solid business or investment model.
Bill Gates once said that cryptocurrencies were 100% based on “the greater fool theory.”
The theory states, “during a market bubble, one can make money by buying overvalued assets and selling them for a profit later.” Someone will always be there willing to pay the higher price.
Warren Buffet, Berkshire Hathaway CEO, once called Bitcoin “rat poison squared” and claimed that he would never buy all BTC in existence for 25% of its value. The famous investor firmly believes in companies and sectors that generate consistent and healthy cash flow.
The author Taleb said about BTC was “a perfect sucker game” during a prolonged period when the coin offered very low interest.
Bitcoin is now trading at approximately 76.25%, down from its peak value of $16,461.
About “The Black Swan: The impact of the highly improbable.”
A famous book explains why we are so bad at predicting the future and how unlikely events dramatically change our lives. And how one can become better at predicting the unpredictable.