Is the crypto market just a criminal’s playground?
10th January 2022 |
What do you think of bitcoin right now?
Are you happy with where it’s at? Are you mad disappointed, or excited?
I’m not just referring to the price of bitcoin. I’m also talking about the development of blockchain and its mainstream adoption.
If you can spare a moment then please share your thoughts with me via this link (which will auto populate the headline, “My Thoughts on Crypto Right Now”).
Why am I asking this? Because it’s easy for me to write to you and explain my views on crypto because I’ve been in this market for over a decade. I’ve my fair share of crypto cycles come and go.
That doesn’t make it any easier when the whole market has peeled about 50% off last year’s highs, but it does give me some perspective.
Not everyone has that longevity or perspective in the market. You might have only got into crypto last year, and now you’re really feeling the pinch. That’s why I want to know what you think of the crypto market and where you think it’s heading.
Is the recent sell-off a blip on the radar? Or is this the start of a new “crypto winter”, like the one we saw between 2018 and 2020? Could this be a moment that shakes out the market, gives is a chance to reset, and presents an opportunity to climb higher over the course of the year?
Let me know using the link above and if you’re happy for us to publish your comment (or not) and we’ll publish some over the coming weeks.
As for my view on it… well, it’s simple. And if you’ve been reading Sam Volkering’s Crypto Network for a while, you’ll know what I’m about to say…
Whether crypto prices are shooting up or down doesn’t impact my long-term view of crypto. This is a volatile, fast-moving, cyclical market. Cycles that take years to play out in the stock markets can occur within just a few months in crypto. Double-digit moves up or down can happen in a week.
You can watch your crypto triple in value, then halve, and then halve again… only to triple in the blink of an eye.
But overall, when you look at how many crypto networks are developing, it’s difficult to argue that the future of the market is anything but bright.
Of course, the mainstream media doesn’t help this much. They will have you believe that crypto is still an a lawless “Wild West”.
They couldn’t be more wrong.
For a start, the crypto space is actually quite well regulated. Many exchanges now have licences from various regulatory bodies from the countries in which they operate. Sure, they don’t have the same protection as banks provide… but they’re not trying to be banks.
Think about it like this: what protections do you get when using the internet? You can expect those same kinds of protections when using crypto networks too. Because, crypto isn’t about trying to be a bank or a broker. It’s about building new networks, connections, and communities that are decentralised and distributed.
These are platforms, and networks like the internet or like any number of app-based businesses that have become multi-billion-dollar giants of the stock market.
You can reel through companies like Shopify, Etsy, PayPal, Snapchat, Meta, Google, Spotify, Netflix, Lyft, Uber, Zoom, or Square… companies that are worth tens of billions of dollars each, or trillions of dollars combined.
All of these companies function as platforms or networks. They are not Ponzi schemes, they are not scams, and they are not (typically) used for criminal activity.
They were born from a period that enabled applications to exist, for new networks to grow and for people to connect, interact and transact in a new way.
The same thing is happening in crypto today. While bitcoin might be 13 years old, the broader crypto space that is developing alongside these new networks is no more than four or five years old.
As with many of the companies I named above, not all crypto projects will succeed. But many will. And the crypto projects that flourish will enjoy similar valuations to their app-based predecessors.
A crypto platform with a current market capitalisation of $1 billion may look tiny compared to the kinds of valuations of some companies in the stock market. But the crucial distinction is this: many of the companies on the stock market have nowhere near the value proposition that many crypto platforms do.
Consider the way in which our digital world is built. First, there is the underlying technology platforms (i.e. the internet or blockchain networks). Then, there are the layers on top, such as applications and decentralised applications. Both stages provide a wealth of opportunities for investors.
This is why a good way to look at the crypto market today isn’t just in terms of valuations. The fundamental construction of layer one, layer two and soon enough layer three networks is a huge opportunity, too.
The chance to own a slice of these networks, participate in how they function, and be a part of the platforms they’re building is something to be excited about. And you invest at prices that just six months ago were considerably higher.
Of course, deciding to buy into a market following a sell-off can be scary.
The mainstream media and traditional financial institutions don’t make the decision to invest any easier. They continue to fuel a narrative that perpetuates suspicion around the crypto market.
As I’m about to show you…
When is a headline not a headline?
Here’s a headline that ran on The Wall Street Journal last week:
Cryptocurrency-Based Crime Hit a Record $14 billion in 2021
And here’s the one from Reuters:
Cryptocurrency crime in 2021 hits all-time high in value – Chainalysis
And another from CNBC:
Crypto scammers took a record $14 billion in 2021
Best not leave out our good friends over at the Financial Times:
Record $14bn flowed into crime-linked crypto wallets in 2021
Wow. Those headlines would be enough to scare away even those with a healthy risk appetite.
Of course, the point of such headlines is to grab our attention. They are designed to make you fearful.
But all is not what it seems.
For example, the data all those headlines are referring to is readily available from a recent report from Chainalysis. And when you see the data, those headlines are technically correct but still far away from the actual story.
Yes, in terms of value, it’s estimated that around $14 billion worth of crypto was “lost” through scams and criminal activity.
However, what this doesn’t tell you is that these scams and criminal activity actually make up a tiny proportion of overall crypto activity.
US news outlet Axios also prepared a report on Chainalysis’ data. Its headline read:
Report: Illicit activity actually a tiny part of cryptocurrency use
Now, that’s quite a different view from the mainstream headlines, isn’t it? Considering they’re all looking at the exact same data from Chainalysis, how on earth could they be so different?
Well the Axios report is calling it like it is. And when you look at the data, you’ll see it for yourself…
Source: Axios
See that tiny little 0.15% bar on the end? That’s the part all these headlines are referring to. As the Axios report explains (which you can see in full here):
Crypto crime is at an all-time high in absolute terms, the report found. It’s just that the growth rate of legitimate activity far outpaced the growth rate for illicit activity, Kim Grauer, director of research at Chainalysis, tells Axios
You see, when it comes to this market, the mainstream media really a place of misinformation. You need to broaden where and how you get information, and check the sources that outlets cite, if you want to understand crypto yourself.
The Chainalysis estimate for 2021 may still change before the final report is released in February, as it did for 2020 when the initial estimate of 0.34% was raised to 0.62% when all the data was compiled. Even so, they expect the difference to be small.
When you start to understand the momentous growth that is underway in the crypto sphere, then the fear and worry begins to subside. Stepping into new, exciting areas of crypto becomes a little easier.
And sell-offs – like those we’ve seen recently – simply become a new buying opportunity.
Crypto to Know
Below is our “Crypto to Know” list where you’ll find several cryptos that we think you should be taking the time to learn and understand.
They each form an important part of the burgeoning crypto ecosystem.
Several of these cryptos are doing very different things to others.
What’s key is to learn that every crypto has its own use cases, its own guiding principles, and its own particular potential.
Each crypto is to be judged and assessed on its own merits.
Our aim here is to help you understand these cryptos and the wider crypto world.
These aren’t recommendations but a guide to help you learn and build your confidence in operating in this space.
We will add more names to this list over time. However, if you’re new to the world of crypto, these are the names where we think you should start your education and learning.
We’ve also added links to each one.
The links are to what we believe, in each case, is the best resource for learning about that crypto.
“Crypto to Know” watchlist
- Bitcoin –it/wiki/Main_Page
- Ethereum – ethereum.org/en/what-is-ethereum
- IOTA – docs.iota.org
- Tezos – https://tezos.com/learn/getting-started/
- Filecoin – docs.filecoin.io
- Cosmos – v1.cosmos.network/intro
- Binance – binance.com/en/about & research.binance.com/en/projects/bnb
- FTX – ftx.com & help.ftx.com/hc/en-us
- Solana – https://docs.solana.com/introduction
- Secret Network – https://scrt.network/about/about-secret-network
Until next time,
Sam Volkering
Editor, Sam Volkering’s Crypto Network
