Like many others, I was wrong about Bitcoin and cryptocurrencies. But timing is not the destination, and I believe that one day something massive will happen that will wipe out trillions of dollars from the crypto world. This may happen when Bitcoin is at $200,000 or $2 million, but it will happen.
For the uninitiated, a rag pull is a coordinated effort by a focused group to sell their cryptocurrency holdings at a price they are happy with, leaving the foolish masses with nothing but losses. It is a transfer of wealth from a large group to a small group. One very prominent recent example is the President and First Lady meme coin.
More than $100 million was made by issuing pre-market coins to insiders who captured the most value, leading to a wipeout of average investors. Coins currently trade at a fraction of their issue value. Melania Trump’s stock is now down 99% from its peak. A total of 764,000 investors suffered losses.
Don’t panic, the Trump family’s new company, World Liberty Financial, has just started trading. Its share reaches billions of dollars, and it has no assets other than the capital raised (only digital assets). Reports say it has been hacked and the price has dropped significantly from its original price.
The latest fad, which has already suffered a major crash just a few weeks after its launch, is “cryptocurrency government bonds.” Investors buy into companies that announce they will buy cryptocurrencies as part of their business plans. Many have already fallen more than 90%. This reflects the madness of adding “.com” to your name in 1999 and quadrupling your valuation.
Insiders are often referred to as “whales,” or large holders that can influence the market. The whale decides when to pull the rug. They can do this whenever they think it’s profitable, sometimes within hours of issuance, like with Kanye West’s YZY token, where 51,000 “traders” lost $74 million and 11 made more than $1 million each. There are hundreds of other meme tokens with similar stories. Over 3.7 million cryptocurrencies issued since 2021 have been classified as “invalid” by CoinGecko. However, new products are promoted and introduced to the market every day.
Recently, the word “bubble” has become a hot topic in the financial industry. However, bubbles are usually associated with inflation in the valuations of real assets such as stocks, bonds, real estate, and commodities that trade above historical norms. Analysts use dozens of indicators to measure the probability that future asset prices will fall and bubbles will deflate.
Since virtual currencies exist in the world of fiat value valuations, such financial indicators do not exist. What is the value of the Pepe the Frog meme token? What is the value of the hundreds of thousands of “sh coins” minted daily on Solana? What is the difference between one token and another, since it has zero intrinsic value?
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