Where do we go from here?

The crypto endgame is here (or is it?) - what do?

Questions, questions, questions, just give me some damn answers

Is there anyone who can give you an answer as to what might happen over the next year? How about the next decade? Maybe the next century? Of course not, or they’d be locked inside a bunker somewhere working twenty-four hours a day for the CIA or some other three letter agency.

One of the main draws to reading a news article, blog post or report of some kind is the promise of gaining something new at the end. Whether it’s a recipe, advice for dealing with a broken home appliance or even just a laugh, you click on something with the intent of extracting value from the writer in an unconscious way.

You could maybe describe the concept of reading things online as a form of 21st century fortune-telling, a practice that began a long time ago when a large percentage of the world’s population had absolutely no idea how the fuck anything worked or no clue how the hell the next day was going to go down. People gravitated towards fortune-telling because back in the day, they didn’t have therapists.

But instead of describing writing articles as a form of distributing fortune advice, I’d like to go a little deeper and think about our history and obsession with knowing the future and why it’s so important.

When you think of a fortune teller, you probably picture someone dressed like a wizard inside a dark room somewhere, speaking to the ceiling with their eyes rolled back in their head - but this wasn’t the case. Modern fortune-telling is a farce; a shell of what it once was thanks to the hammer of modernity that stripped the careers out from under an entire industry of hardworking and well-meaning fortune tellers. Let me explain.

There is an important distinction to be made when it comes to fortune-telling, as there are two different types that vary greatly amongst each other. On one side you have the spiritual ones, the fortune tellers that are popularized in media which probably make up your understanding of the industry as a whole. On the other, you have the ones I mentioned earlier, the fortune tellers who told the future as a good deed to help individuals feel a little bit better about the innate uncertainties of human life. Sure, it was their job, but isn’t that kind of what a therapist does? They tell you how to make sense of your chaotic life and also provide you with statements to make you feel better. It isn’t a cure all, but it works for many. This was the role of the fortune teller.

As you can probably guess, the first type of fortune teller quickly gave a bad look for the second kind. As the population became wiser and technology developed to give us a better understanding of the world, the latter half of our categorized fortune tellers couldn’t keep up with the demands. Spoiler alert: they couldn’t actually tell the future or do better than to maybe get lucky with their non-educated guesses. Over time, the fortune-telling career was phased out and remains as nothing but a distant memory of what it used to be. There are still a lot of fortune tellers out there and maybe some of them can tell the future, but I find it hard to believe anyone worth their salt in otherworldly ability would be selling themselves out for $60 an hour in California - but what do I know?

There’s actually a really great short story by David Foster Wallace that touches on predicting the future. In “Another Pioneer,” a man tells the story of a story he overheard another man telling someone that this same man had overheard while flying on a plane. The story is really interesting and I recommend reading it whenever you have the time but I’ll give a brief summary.

A child is born a long time ago in a primitive village somewhere in the world, a child with extremely supernatural intelligence who was unlike anyone else in the village. By the time the child was two or three years old, he was able to answer any question asked of him - an extremely stark contrast to his peers who were running around and learning the ins-and-outs of village life in the Paleolithic age.

The child didn't possess ordinary intelligence, as his intellect was more than just the ability to answer basic arithmetic questions or other nonsensical things that any other smart child could do. The child was able to give extremely cogent answers to questions ranging from what type of twigs to use for hunting specific animals to the cultural importance of various items gathered across the village, things that no one else had known the answers to. Before long, the village begins asking the child more important or profound questions, often involving moral conundrums or religious questions that had remained unanswered since the beginning of time. The child was treated like a god.

The village eventually constructs a platform for the child stationed in the village, one where families and individuals would come to him with a question in dire need of answering - but this would only happen every “29.518 synodic days” as to avoid wearing him out. The child would never leave the platform.

Because of the child’s profound intellect, the collective intelligence of the village grew, along with the advancement of life inside the village. Primitive tools, habits and other various ways of living were phased out and replaced through the advanced techniques and answers given by the child, progressing the village at a rapid rate. Consultancy “castes” even popped up, offering the average villagers a more efficient line of questioning to get the most out of their monthly ask. For a fee, of course.

Eventually, the narrative digs deep into the fact that because the man had overheard the story on a plane, many of the parts are inconclusive and the story diverges into three parts in the middle, with each ending in the child being asked an unintelligible question from a shaman that changes his life forever. The child enters a period of withdrawal, refusing to answer any questions for months.

Upon awakening from this mini hibernation, the child’s method of answering questions has changed dramatically, shocking the village. Where the child used to answer directly so to avoid conflict with the village, he now answers in secondary and tertiary answers, often providing the exact opposite of what a villager would want from him. As you could imagine, this angered the village and caused quite a stir - they didn’t possess this level of otherworldly ability and were unable to make sense of these new answers. This went on for some time until the child threw another curveball at the village, responding to questions with questions of his own (oh boy) or devolving into rambles with no intelligible statements for the village to gain anything from.

To make a long story short, the village eventually falls apart through its acquisition of newfound knowledge and the child never leaves his platform, dying in the end.

I really like this short story because it’s a real thinker and explores the idea of what humanity might become if it gains all the answers to its questions. Is it bad to suddenly know everything? Is it better to have the constant thread of hope to cling to without the full knowledge of what to do or what’s to come?

But how does this play out in the modern age, and what would it mean to really have an answer for everything?

Think about all of those dime a dozen stock articles you see in ads from websites like The Motley Fool. They’ll tell you exactly what stock to buy, when to buy it and when to sell it, 15 times a day. And you know what? There are thousands of people who click those, getting a little giddy at the thought of making a 50% return on something like Carvana or Roblox without doing any due diligence. But that’s just how the legacy markets work. Financial advisors sort of do the same, although they’re much more calculated in their semi-educated guesses.

I’m not talking about the institutions; I’m referencing the private financial management places that your parents will be begging you to work for after hearing the news of FTX’s insolvency. They have a game plan, shill it to their clients and hope it goes well, all while telling everyone that “it’s going to be okay, the market always works itself out over the long term.” And that’s the best part about adding in those last four words - you don’t have to get anything right if you say them!

Just like fortune tellers were able to get away with telling blatant lies to tens of thousands of unknowing individuals, financial managers and family offices can get away with being wrong more often than not, maybe more-so than weather forecasters.

There’s nothing wrong with this, however. The average person trusting funds to a third party doesn’t know enough about the market to manage them on their own and are better off 99% of the time letting a professional handle it. But even professionals don’t know enough to do well all of the time, just look at how many shenanigans have taken place over the last two and a half years. We have VCs blowing up, SPACs going to zero, hot tech IPOs approaching zero, growth stocks also racing to zero and monetary policy that’s questionable at best. Is there any indication society can function at all without interest rates hovering near zero? I dunno man!

Humans have an inclination to trust authority figures, so that explains why so many assets are entrusted in institutions and why the US government works the way it does. People in power make decisions that are right or wrong, while attempting to make more right decisions than they do wrong ones. Life goes on. You don’t let someone manage your retirement account with the intent of making 25% returns a year for four decades straight, you do it because you believe they can keep your money safe and make a little more money for you more often than not. Just as humans of the past went to fortune tellers to make a little more sense of their lives, we offer our attention and money towards other individuals because we believe they can guide us and make our future a brighter one.

The truth is that nobody can predict the future - we’re just dead-set on believing some people can and want to imagine a world where we’ve picked the right future tellers. Maybe this explains why so many were fooled into the trap of the effective altruist.

After the collapse of FTX, I don’t know what to think.

You could’ve told me the fall of Terra, centralized DeFi platforms (Celsius, BlockFi) or even Three Arrows Capital was the pico market bottom event for crypto and I would’ve believed you. In fact, I would’ve said that the combination of all three of these was a bottom signal less than a week ago. Unfortunately, FTX’s insolvency is the toughest nail to drop on the crypto industry to-date.

With each passing week I become increasingly less certain of crypto’s future. For a while, SBF was a net good for the industry when it came to things like raising awareness about crypto or getting newcomers involved. In recent months, sentiment started to turn and he became less of the poster child he’d made himself out to be, whether it be the infamous DeFi regulation thread or his growing obsession with crypto policy in the US.

SBF had his face plastered everywhere. SBF did advertisements with Tom fucking Brady and was actively lobbying for whatever regulations he could have wanted that would have ultimately decided the fate of our industry - but he’s gone now.

All of the events that contributed to crypto’s horrendous price action this year are a result of the opaque systems we created; the systems antithetical to our everlasting hunt for truth in the people we surround ourselves with.

Why did we deposit our precious funds into platforms like Celsius? Why did we blindly believe LUNA and UST would work out in the end? Why did we trust in the super cycle theory hypothesized by Su and Kyle? Why did we leave our funds in FTX expecting anything different to play out?

Were we complacent? Were we just a little too greedy? Were we blinded by these individuals and their mystical personalities? Maybe it’s a combination of all of the above.

With FTX removed from the picture, crypto is facing a make-or-break moment. The systems that ruined us weren’t the fault of crypto, they were the result of bad businesses and individuals capitalizing on crypto. There’s nothing inherently evil or insidious about Bitcoin or cryptography, so why did everything go so south? In the midst of the bull market, we allowed some bad apples to fill us with intrigue and we didn’t do anything about it because we were making so much easy money. Now that the music has stopped and no one is dancing, we’re all a little confused. From here, there’s really only one path which involves the active criticism of centralized entities to keep them in check, praising of centralized entities that do good for the space and, oh yeah, decentralization - can’t forget that one.

Self-custody is huge and probably the biggest net positive crypto can bring to the world. You always hear people in the space talking about banking the un-banked or un-banking the banked, but it’s we actively pursue educating the world about the treacherous (but promising) waters of self-custody, opsec and DeFi. Instead of sitting around trading perps on FTX, why don’t we give a little more credit to the systems that have actually done well and shown transparency in times of struggle?

Ethereum didn’t break, a business based out of the Bahamas did. Crypto isn’t dead, only some bad actors are.

Hopefully you are doing okay after this week’s events and aren’t struggling too much with potential trapped funds. My DMs are always open on Twitter (@knowerofmarkets), feel free to shoot me a message.