Away from the hype and excitement around blockchain and new forms of money, a Foreign Policy article offers a sobering view of the new business world that has sprung around the hype around cryptocurrencies, tokens, DeFi, NFTs and digital assets. It turns out it is the same old finance and market practices that have found new life around tokens and technologies – like check kiting or pump and dump.
Amy Castor, an independent reporter covering crypto since 2016, considers 2023 to be not very different, and so the Terra and FTX effect can be expected to extend further. The latest cited in the article are Genesis. One currently facing the heat is Barry Silbert’s Digital Currency Group (DCG).
DCG is the product of a Wall Street banker, and has invested in over 200 ventures, including exchanges like Kraken, NFT ventures, defi apps for Web3, payment services in Africa, digital assets, etc.
The link with Wall Street points to the principle underlying the crypto game – the old financial instruments and their trading practices have taken on the form of cryptocurrencies – which are money and securities both doubled up in one form. The article calls them “new forms of existing financial instruments used in the service of old shenanigans”.
The shenanigans are – money laundering, overleveraged trading, penny stock manoeuvres or malpractices such as pump-and-dump (raise the price of a token and then sell and exit – typically seen in most token price charts as a steep cliff after launch, followed by near decimation to ground zero level).
These practices, as per the article, are surrounded by talk of new tech that has made things different compared to the conventional and what is currently known. So crypto is a new form of money, and the current rules can’t be exactly applied.
What’s bubbling up now could be yet another price movement, and if that’s not deflated early one, there will be more transfer of wealth from new buyers and retail customers to old Bitcoin hands. That’s like in a giant ponzi scheme.
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