Revolution Investing: Pain and losses in crypto will clear out the losers and strengthen the case for bitcoin

by | Nov 11, 2022 | Stock Market

Cryptocurrency is a mess right now. And rightly so. I wrote about buying bitcoin for MarketWatch in 2013 when it was trading for $100, but I’ve spent the past year or so warning that most newer cryptocurrencies will be worthless. Here’s what I wrote earlier this year:

“[M]ore than 95% of the 15,000 cryptocurrencies are silly or fraudulent. Nearly all of the silly cryptocurrencies will head to zero, and all of the fraudulent cryptocurrencies will head to zero. That leaves about 5% that will probably increase in value in coming years. “I expect the Securities and Exchange Commission (SEC) to send cease-and-desist letters to the founders of thousands of cryptocurrencies over the next few weeks or months. Any cryptocurrency or token for which the creators received founders’ tokens or any other benefits are going to be classified as securities when the SEC looks at them. If the founders got economic or financial benefits but didn’t register with the SEC, they’re probably in violation of regulations.” Read: ‘A lot of people have compared this to Lehman. I would compare it to Enron’: Larry Summers on FTX’s bankruptcy The cryptocurrency market is even worse than I expected. It didn’t occur to me that a major exchange such as FTX would be marking its own tokens, on leverage. FTX is now bankrupt, and effective altruist Sam Bankman-Fried is out as CEO. The company, its investors, and its myriad subsidiaries and creditors are REKT (cryptospeak for “wrecked”).  I’ve been short some of the many low-quality crypto-related stocks, although I’ve taken some profits on those positions into this crypto crash this week. I’ve also, for the first time in many months, put some bitcoin
exposure back into the hedge fund through the ProShares Bitcoin Strategy ETF
which uses futures to get exposure to bitcoin prices. I’m still net short crypto overall in the hedge fund. Bitcoin is hovering at a two-year low. I still own bitcoin personally, although I have taken some off the table at higher prices and a …

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