- Crypto is literally just made up BS.
That's what this man David Gerard has to say, anyways.
And he's not the only one that believes this.
Over the past few weeks, I've had article after article
sent to me stating that crypto is a lie.
And my first reaction is like, yeah, OK, whatever.
This is just another hit piece. Who cares?
But the more I dug in, the more
the arguments actually made sense.
And this led me to the question, what if crypto
is actually far smaller and shadier than we think?
Does this mean any investment here
is doomed to lose money?
Or is this just a new market working out the kinks?
I needed to learn more.
If someone asks you how big the crypto market is,
you probably just pull up CoinMarketCap,
rattle off that big number up top.
The total crypto market cap,
the combined value of all cryptos.
The problem is this valuation isn't perfect.
It only reflects the last prices
coins were purchased at.
If Bitcoin is at $30k, doesn't mean everyone can sell
it right now and get that full $30,000 price.
So it's not perfect, but how far off is it?
And what else is crypto hiding in the shadows
that appears bigger and better than we think?
It turns out quite a bit.
See, when the recent crypto crash knocked the
total market down from $3 trillion
to just $1 trillion, people started asking questions.
They began looking more closely at trading volumes
before discovering most trades were
The blockchain is transparent.
You can look up trades in real time.
I was confused, too.
And that's when I came across this report by Bitwise.
The report starts by suggesting the
Bitcoin market should be incredibly orderly
and efficient, with nearly perfect prices.
Yet it's a mess
with huge price differences between exchanges.
But, why?
Well, they saw a daily reported trading volume of
$6 billion between Bitcoin and cash or cash equivalents.
And that doesn't seem very crazy at first, until you
see the exchanges that have the biggest volumes and you
realize you probably haven't heard of most of them.
The top listed exchanges show volumes in the
hundreds of millions daily, where huge known exchanges
like Coinbase Pro show just 27 million daily.
So straight away, something obviously
fishy is happening here.
And Bitwise was able to figure out a few key ways
to determine if an exchange is faking it.
A fake exchange constantly receives
matching buy and sell orders.
They usually have an equal number
of purchases and sales each day.
Many transactions are for weird amounts,
like 0.053954 BTC.
And real world things like the time of day,
price movements and big news events
have absolutely no effect on fake exchanges.
In short,
They're empty ghost exchanges where very few
humans are actually buying or selling anything.
In fact, Bitwise looked at 81 exchanges, and
only ten of them had real trading volumes.
10 out of 81.
They simply use bots to create action
within the exchange, trading against one another.
And the strangest part?
They don't even try to hide it.
It's all right there for anyone to see.
To explain the dark reason why they're doing this,
let's go to Starbucks.
There are about 32,000 locations around the world.
Now, imagine less than 4,000 of them
are real Starbucks with real human customers.
The rest are just filled with NPCs, who order a
cappuccino and hand it back and get a refund.
And then they order it again
before handing it back again.
This over and over again all day long.
What this does is make Starbucks look super popular.
They can say, hey, look at these numbers.
We're selling millions of cappuccinos a day.
This may attract investors or act as social proof.
So real customers decide to try it out
because, hey, everyone's drinking it.
It must be good, right?
And the craziness doesn't stop there.
The report also found that the American market
for Bitcoin is far larger than we think.
For a while, we were operating under the
assumption that only about 1% of all Bitcoin
transactions came out of the US.
Turns out that number is more like 30%.
Now, I know what you're thinking.
Try fitting that one into your coffee NPC example.
And you know what? I'm going to.
So imagine we were told that only 1%
of all Starbucks are in the US.
You probably look around, seeing one on every corner
and think, Jesus, this is just 1%?
You'd have to assume there's literally a Starbucks
everywhere you turn in China or Europe.
But you look back to the total location stat
and see that there's 32,000 worldwide.
That means there's only 320 of them in the US?
That can't be right.
We'd all be these caffeine deprived zombies.
So you start counting one by one, and it
turns out there's actually 9,000 Starbucks in the US.
Which, coincidentally, turns out to be
about 30% of the global total.
What this does is reframe your mind.
Yes, Starbucks or Bitcoin is big,
but it's far smaller than it appeared.
That's extremely important when it comes to
finding the true value of crypto.
And this isn't just one single study.
Another report found that some exchanges fabricate
up to 95% of all transactions.
But why would they make this stuff up?
Like, sure, it could make crypto look bigger, but
It's simple, actually.
Why do you choose one crypto exchange over another?
Apart from a neat logo, a cool name,
you want a stable, established place to trade, somewhere safe.
So faking these trades, first attracts investors and
profitable projects like new ICOs, and second, makes
it look like there's a lot of liquidity.
The exchange looks more reliable.
It makes business sense for them to lie.
Now, before we go even further down this rabbit hole,
I have to quickly tell you about an exchange that you can trust,
Bybit, which sounds a whole lot
like what you'll be saying to your ex once you
start racking in that juicy passive income.
They're a brand new sponsor of mine,
so hopefully they're chill with that line.
We'll find out if you ever
see them sponsor me again.
Anyway, so there's a few points
I'm contractually required to make.
Bybit is not only offering zero spot trading fees
and a $50 bonus when you deposit just $1,000,
but they're also soon to roll out
third party audited one-to-one proof of reserves.
Of course, in the light of recent events,
its great to use services like Bybit to trade,
but it's always best to store that crypto in your own wallet.
So click the link in the description,
type in your info, create an account, and start earning already.
It's a limited offer, so check them out.
Now back to the market cap problem.
This impacts everyone.
We were told that the total crypto market cap at
its peak was about $3 trillion, but we're finding that
that figure may be based on nothing but hot air.
The problem is, no one agrees to the
actual trading volume or the market cap figures.
The further you dig, the more estimates you find.
And they're all different.
And that's not because the date is bad.
It's due to all these weird gray area questions
like what do you exclude from market cap?
Tokens to pay for niche products.
It's confusing, as ***
If you remove those things,
the market cap shrinks a lot straight away.
And an even bigger problem is wash trading,
which sounds like a perfect time for me to come up with a joke
about swapping crypto in the shower, but I could not come up
with anything remotely funny, so please comment.
your best wash trading jokes below
and make up for my loss here.
Wash trading is when you make a financial transaction,
but the ownership never actually changes.
It's buying an asset off of yourself
while pretending a third party was involved.
It's nothing new.
It's been illegal in the stock market since the 30s.
But the fact that digital assets are tricky
to regulate, meaning they're ripe for wash trading.
Do you remember when Melania Trump sold
their first NFT a while back?
Well, the 1800 Solana coins paid for seemed to come from
a wallet owned by the people who created the NFT.
Some claim this was a cover up for money laundering.
Others say it was simply a save face
when no one wanted to buy her NFTs.
I don't care.
I think it was probably because she
just read The Art of the Deal.
But who knows?
Either way, Melania has since launched even more NFTs.
And while people questioned the value of this,
it came with a wild opening price of $250,000.
So things seem to be working out okay for Melania,
but what part did allegedly buying her own
NFT play in her future JPEGs becoming so expensive?
- Their integrity.
- Maybe a lot. If an asset has no intrinsic value, then it's
only worth what the last guy paid for it.
This NFT I made in my left ankle must
be worth $1 million because I sold one of
my right ankle last week for a million bucks.
The CryptoPunk scandal is another great example.
This thing was purchased for $532 million with borrowed funds,
then sent back to the original owner and put
back up for sale at double the price in
order to make everyone else think it's worth more.
And believe it or not, this isn't technically illegal, yet.
And the same thing actually happens
all the time in the traditional art scene.
However, I suspect a good prosecutor could still get
you on this, so I wouldn't advise it.
Wash trading crypto tokens happens all the time as well.
If you want a token to appear
more valuable, simply swap it back and
forth between wallets, building up trade volume.
Do that long enough and people will notice and think
the coin is more successful than it really is.
They'll want to jump on the bandwagon.
This happens with tiny tokens.
This happens in exchanges trying to look more credible.
And it turns out, this happens with Bitcoin.
This report states that half of
all Bitcoin transactions are fake.
Now the question is,
It's time to face facts.
The crypto market isn't as big as we're told it is.
Estimates range from the market cap being pretty good,
like 10% bigger than it should be,
to as much as 70% bigger.
So does this mean that the price
of Bitcoin should drop to, i don't know, $3?
Probably not.
Here's the thing.
We need some way to value the crypto market,
and market cap, even though it's flawed, is the easiest way.
A better method would be to average
the buy in price for everyone.
So, like, let's say Bitcoin is at $60,000 and
the average holder's buy in price is $30K, then
the market cap would be based on that $30,000
figure multiplied by the total supply of coins.
However, that's far more complicated.
And beyond that, it appears to me that any
manipulation that can be done, whether it's by exchanges faking in,
wash trades, or any questionable tactic.
Those really only work in the short term.
Like, sure, you can pump some crypto with trade volume,
but if real people don't actually begin trading it and
begin making real deposits from their bank accounts,
and in the long run, things generally equal out.
We're in a crypto downturn right now, and
current prices are much more in line with
what researchers believe the true value actually is.
So that may be a good thing.
It could mean that right now is some kind of
buying opportunity if you believe in the technology long term.
As long as we stay vigilant about
scams and question numbers that seem suspiciously good,
I think we'll be all right.
Now, from here, I would like to take this chance
to entice you to join Finova.
It's a platform I built with my own two hands.
And by that I mean I hired
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It's a replacement for Patreon that offers
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