Cryptocurrencies to $0 (DISLIKE the $H*T Out of This)

hey everyone me kevin here the economist

released a really awesome paper on what

about the possibility or what would it

take for cryptocurrencies as a whole to

go to zero

and in this video i'll also talk about

what i sold and what i bought when it

comes to cryptocurrencies let's get

right into it and remember my coupon

code on building your wealth does expire

tonight price goes up tomorrow morning

all right folks take a look at this

right here so this is the economist i

highly respect this magazine they do a

great job

and take a look at the middle of this

article we're just going to look at some

of the fun parts here first they talk

about what could happen if

cryptocurrencies evaporated because when

we go to that extreme then we can kind

of see the contagion that it would cause

and then potentially work backwards and

evaluate is that even likely to happen

because it shows us how intertwined

cryptocurrencies are already

at how they've become and are becoming

more intertwined so take a look at this

the total value erased if

cryptocurrencies went to zero

is not just the value of the

cryptocurrencies but also the value of

crypto firms and exchanges

think binance

coinbase or other companies that have

massive market values outside of crypto

market values but on our stock exchanges

right but also think about other

companies like square paypal revolut

visa as the economist says they would

lose chunks of growing juicy business

revenues which would dent their

valuations and some companies would just

go utterly bankrupt obviously think

about hud-8 mining for example as a

smaller canadian miner right the

contagion would be pretty bad if

cryptocurrencies went to zero because so

many companies are involved now

including even to some degree tesla who

invests

in

bitcoin but let's take a look at this

others oh also check into the chat take

a look at this others that have also

ridden the crypto boom nvidia think

about those graphic cards to mine

ethereum uh or the asic chip makers who

are uh using asics to mine bitcoin but

anyway contagion could spread through

several channels to other assets both

crypto and mainstream and so they give

three channels to which a crash could

happen and then they talk about sort of

the likelihood which i'll talk about as

well and i found the three channels

really interesting we won't go super

deep i'm not going to read you all of

this word for word we'll give you a

little bit of a summary here so channel

number one

is leverage the economist believes that

ninety percent of money invested in

bitcoin is spent on derivative like uh

derivative products like swaps or

basically bets on future price

fluctuations

that's because estimates show that about

70 of cryptocurrency trading right now

is done by institutions who have access

to a lot of different derivative

products that we don't have options or

access to one really common type would

of course be an option contract right a

call or a put in other words a way to

make it directionally bullish or

directionally short bet bearish bet now

they also mentioned here in the

economist that most of these trades

happen on unregulated exchanges where

customers can essentially borrow and

borrow more and more money on top of

borrowed money essentially and this can

trigger big margin calls which honestly

that's some of my favorite those are my

favorite moments to invest in crypto

because then when i see crypto prices go

down i know it's not because of the

crypto itself it's because of the

overall broader market that's suffering

pain people are getting liquidated

because they took out too much leverage

hopefully it's just the suits like

citadel or whoever's investing uh and

retail are buying the dip hopefully but

anyway uh now

margin calls in crypto currencies can

get exacerbated by leverage and they

mention here that it's hard to tell

exactly how much a leverage there is

because there isn't as much transparency

in the cryptocurrency market and i

understand there are some weird guys's

in the uh typical financial markets as

well uh some weird leverage things that

go on that we don't even know about some

weird arcane products certainly ones

that have led to the 2008 great

recession the cryptocurrency hasn't done

that to us yet but then beyond debt

and uh margin essentially and margin

calls they mention that stablecoin fud

again right the potential that

stablecoins break the buck aren't

actually worth a dollar and when they're

not worth a dollar people seek to redeem

their stable coins potentially not being

aware that if they're signing up for

interest on their stable coins they've

now lent that money out and those stable

coins could be lent out 10 20 different

times and you could potentially see a la

collapse in confidence or the breaking

of the buck of stable coins and then

ultimately selling of crypto and then if

crypto is sold off because let's say

tether falls apart you know the good old

tether fight then all of a sudden you

get those margin calls and you have

these two channels compounding on each

other uh and so that gives you kind of

just a brief summary of that

and then of course there is another

potential uh reason for a sale and that

is what they call a cryptocalypse which

is kind of like an apocalypse like the

end of sentiment around crypto so the

economist is saying like look you'd have

massive contagion outside the

cryptocurrency world if crypto went to

zero you'd also have uh three channels

to get there one is leverage two is

stable coins but then also a loss of

sentiment and this is where a lot of

folks who question cryptocurrency say

hey the only thing that actually props

up the value of cryptos is is

potentially sentiment that's what some

people argue right uh they're like

where's the where are the earnings right

where's the fundamental and and this is

where obviously crypto fans encounter

generally back with store value or

utility of some sort or purpose of some

sort right but they make this

interesting argument here that one of

the reasons people are so into crypto is

potentially because of low interest

rates leading to lower yields in the

market leading people to go towards more

exotic assets

like cryptocurrencies

found that kind of an interesting

argument and so this creates the idea

that you could have these three channels

that actually relate to each other and

so this is where the economist really

paints this potential picture of wait a

minute you have these three channels to

see it collapse in cryptocurrency if you

have a loss of sentiment you could break

the buck on stable coins and then you

could have this leverage disaster and

cryptocurrency could essentially go to

zero as the exotic acid as they call

exotic acid evaporates now to the extent

of this actually happens they don't give

an opinion

but i will

what i think is because of the vested

interests by so many companies both

publicly traded off market defy

institutional investors

non-institutional investors retail i do

not see cryptocurrency going to zero but

i do see cryptocurrency as a trading

opportunity in some cases and in other

cases i see it as a huddle opportunity

and now what about what you see

regarding me selling my crypto

yes i did sell my crypto but i have

bought it back i sold my crypto as a

trade during the peak fud of the

evergrand crisis i sold and then i

re-bought i'm bullish on crypto in 2022

but i want to be fair about my

expectations i do think that if we do

get inflection points to the downside

and cpi inflation which i think way

understates inflation anyway uh then

then it is possible we could see some

sideways trading on cryptocurrencies at

least until we get out of all this china

fud and all this nonsense garbage which

in my opinion is barely worth covering

uh it's it's so redundant at this point

whatever china see later we'll do crypto

without you and i think 2022 is the

beginning of where we go more mainstream

with cryptocurrency so i'm personally

very excited and i wanted to share this

if crypto goes to zero story with you

because i thought it was kind of

interesting the three channels they gave

and i don't believe they're likely but

they are right

those three things do heavily affect at

least the prices that we see in the

fluctuations in the cryptocurrency

market so anyway folks thank you so much

for watching this video and folks we'll

see in the next one bye