The crypto industry is getting too honest

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there is advertising for the FTX cryptocurrency trading platform, which aired throughout the NBA playoffs. In it, superstar Steph Curry relives a goofy version of his day—eating cereal, cooking pasta, carving an ice sculpture, and narrator Shaquille O’Neal insisting that Curry knows everything there is to know about cryptocurrency. An exasperated Curry repeatedly denies this. “I’m not an expert, and I don’t need to be.” – Curry. finally says into the camera while holding the FTX app on your phone. “With FTX, I have everything I need to buy, sell and trade cryptocurrencies securely.”

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Earn Curry and FTX points for honesty. The new commercial says something that should have been obvious to anyone who paid attention: the countless celebrities who have jumped on cryptocurrency (and NFTs) almost certainly know very little about what they sell. This goes beyond the inherently transactional nature of corporate sponsorship. Everyone knows that athletes shoot ads because they get paid, not because they actually use the product. (Hulu has a series of really funny commercials playing on that fact.) I doubt Curry, who was paid $45 million to play basketball last season, eats too many Subway sandwiches. And yet I believe he could tell the difference between “Steak and Cheese” and “All-America.” barkers in a recent ad. On the other hand, it would be amazing to know that Curry – or Tom Brady, Paris Hilton, Charlie D’Amelio, Snoop Dogg or Matt Damon – could explain what someone buys by investing in cryptocurrencies.

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Alas, the honesty of Curry’s advertising is offset by its cynicism, which sets a new standard for an industry that has plenty to stock up on. Cryptocurrency advertising began in earnest at the end of last year and has grown along with the price of digital assets. Infamously, the Super Bowl featured several of the industry’s big-budget commercials. Most notable was an FTX ad in which comedian Larry David dismissed cryptocurrency as a passing fad with the kicker “Don’t be like Larry.” Like a few watchers indicated from, these announcements clearly did not say anything about the significant merits of cryptocurrency. Rather, they were trying to instill a sense of FOMO, or fear of missing out, assuming that viewers who didn’t buy now, like Larry, would regret it.

These FOMO announcements have at least left open the possibility that the consumer will learn about cryptocurrency before investing in it. Curry’s commercial does without this pretense. To be fair, there is a difference between not being an expert on something and not knowing about it. But the ad is clearly aimed at people who are hesitant to trade cryptocurrencies because they don’t understand it. Message to them: Don’t worry, Steph too! And perhaps more broadly, no one does! If everyone else is acting in the dark, maybe you are not at some great disadvantage. So go ahead and bargain. FTX did not respond to requests for comment.

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Legendary investor Warren Buffett is said to have advised, “Never invest in a business you can’t understand.” (It’s unclear if he ever used those exact words, but the saying has taken on a life of its own.) Traditional investing is a bet that the business you’re investing in will become more valuable over time. As the fundamentals improve and the business grows and becomes more profitable, more people will be willing to pay more for a piece of it, increasing the value of your shares. If you cannot understand how a business makes money, you have no basis for an informed judgment about how its stock will perform. However, as the Curry ad makes clear, there is a way for the crypto market to avoid this intermediate step. Forget the basics: For ordinary investors, the decision to buy a certain cryptocurrency seems like a pure bet that someone else will want to buy it for more money in the future. It’s also the spirit behind The stock meme phenomenonwhich, from a philosophical point of view, is closer to the world of cryptocurrencies than to traditional investments in the stock market.

There is a name for an investment whose value depends solely on finding potential buyers who are willing to pay more than you put in: Ponzi schemes. Critics have labeled cryptocurrencies with this label for almost as long as cryptocurrencies have existed. Recently, criticism has received support from an unexpected source. Sam Bankman-Fried, founder and CEO of FTX, appeared last week at Odd Lots podcast. During the discussion, Bloomberg financial columnist Matt Levin asked Bankman-Fried to explain “yield farming”, a form crypto investments in which people can invest in “liquidity pools” that can pay ultra-high interest rates but can also go bankrupt in a hurry.

As an example, Bankman-Fried asked Levine to imagine a “company that builds a box” that, despite some lofty marketing rhetoric, does nothing. The company, Bankman-Fried continued, could issue tokens that people would buy, although “so far, we haven’t given good reasons why there will ever be any revenue from this box.” Finally, the company could promise to give away more tokens to everyone who puts money in the box, i.e. everyone who lends them money. In such a situation, according to Bankman-Fried, the hype around the token could give it a $20 million market cap. (Although, as Levin pointed out, it should be zero.) Then, as more people see valuable tokens being paid out of the box, they will want to invest more money, further increasing the value. “For example, it’s a valuable box, as evidenced by all the money that people seem to have decided should be in the box,” Bankman-Freed said. “And who are we to say that they are wrong about this?”

“I consider myself a rather cynical person,” replied Levin. “And it was much more cynical than how I would describe agriculture. You just say, “Well, I’m in the Ponzi business and that’s pretty good.”

Surprisingly, Bankman-Fried didn’t put up much of a fight. “I think that’s a perfectly reasonable answer,” he said. “And I think there’s some depressing degree of certainty.”

Even more depressing is what happened next in the crypto markets: nothing. You might think that the head of a major crypto trading platform is speaking out loud the silent part, confessing to popular a podcast about being at least partly connected to the Ponzi business could cause a crisis or loss of confidence in the sector. Not this way. This goes to show that people don’t really care if they put their money in a box that does nothing as long as they think they’ll end up in a group that’s going to get more money later. In this sense, it would be a mistake to compare the crypto market with the stock market at all. Gambling may be a more appropriate comparison. The slot machine does nothing either; This literally a box that takes money and spits money out. The betting industry is prosperous although it is common knowledge that most people who play get left behind.

As with gambling, you can avoid risk by not putting money in the bank. But truly abandoning cryptoeconomics is becoming increasingly difficult. Even if you don’t personally invest in it, you may be living in the world of crypto. Pension funds don’t bet on the Super Bowl, but two public pension funds in Fairfax County, Virginia, invested in crypto funds last fall and reportedly now Considering engage in fruitful farming. Wall Street banks, long skeptical of crypto, grudgingly entanglement themselves more deeply into it, such is their fear of missing out on a big paycheck.

The fate of cryptography increasingly depends not only on the economy. The rise of the sector has spawned a generation of millionaires and billionaires overnight, some of whom have political ambitions. how Washington Post recently informed, crypto investors and executives are pouring millions of dollars into the upcoming midterm elections in an effort to help select candidates who will support the industry’s preferred rules. Then there’s Bankman-Fried, who is worth an estimated $24 billion at age 30 and is growing his presence in the District of Columbia. His political donations appear have more to do with pandemic preparedness than crypto-friendly regulation; as a practitioner of effective altruism, Bankman-Fried vowed to give almost all of his money to causes that would have the greatest impact. That’s what cryptocoke does: it transfers money from someone else’s bank account to his, so that he can dispose of it as he sees fit. He seems to bet that he can do more good with other people’s money than these people. The rest of us will have to hope that he and the rest of the crypto nouveau riches are right. After all, we are not experts.

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