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Written by   45
2 months ago

The difference between crypto and the traditional market is that in crypto, no one bails you out.

So why is it so difficult to bail out crypto firms rather than traditional ones?

The structure of Debt!

It is more explicit about how risky crypto compares to previous years.

I participated in the space in the early days.

With crypto evolving and mainstream adoption with many collapsed projects and trading platforms, the eagerness for crypto has become more prominent and risky.

Crypto has blurred the line between all traditional assets.

It is good and bad.

Good in the sense that crypto can become anything beneficial to own.

We saw its first attempt to become digital money through purchasing a pizza and stock-like trading asset or company shares issued through ICO.

But there is also the downside of such a blurry line: crypto inherent many flaws that traditional assets carry, such as illiquidity and over-leveraging debts.

With the recent FTX collapse, it will be more and more clear on how to handle the debt of crypto rather than money.

The ratio of crypto to cash is not 1:1!

The debt ratio on crypto is not nearly 1:1!

It is more risky to carry crypto lending and it is unsustainable.

Because crypto is not sound money, the loan or debt will be more fluctuate than ever!

In the early crypto days, you lost money on trading platforms due to the market downturn. You were losing the money value. As long as the money exists, you can still claw back.

When you loss money in crypto lending, you loss everything because the third party has leveraged your money, and it is out of your control.

The debt structure of crypto lending is not 1 to 1 ratio of the debt of money structure.

Crypto can be used more than just money, it can be a treasury in DAO, it can be an NFT back-up, or anything you can use of.

The risk of all these utilities is that it will over-leveraged crypto through its unrealistic valuation in the bull market.

When the bear market comes, the devaluation accelerates, and projects likely go under. 

Now you will not only see a loss track of the crypto valuation, but you will decelerate of lending facilities with ever more significant losses you need to absorb. 

And there is no any other asset that can have such valuation accelerate so fast in the short term to cover your losses.

That is the reason all crypto "companies" will go underwater and file for bankruptcy one by one.

The over-leveraged is the nature that embeds into crypto lending and borrowing.

Of course, FTX is another story that is fraudulent of users' money to purchase luxury goods for their C-suite management.

Yes, I lost money in each crypto cycle, and I learned from each mistake I made.

And that is why no hype and no all in to crypto.

We are just ordinary people who test the water with our hard earn money.

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Written by   45
2 months ago
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