OK, guys and gals. Let’s discuss the REAL FOMO (Fear of Missing Out), who’s got it and where it really sits in 2018 now that the Cryptocurrency Craze has gotten some legs, short or otherwise
The View from LaSalle Street
If you tend to follow the cryptocurrency mania (the one taking up much of the social media oxygen these days) then you’ve likely heard all the cute new acronyms, including today’s FOMO. The “Cryptonauts” would have you believe, by way of shaming you into taking (or dumping) a digital coin position, that FOMO and its kissing cousin, FUD (Fear, Uncertainty, Doubt, or Denial), is a tag that any critic of HODL–ing will easily pass along to those of us who are considered “weak” longs, or simply Crypto Doubters altogether (NoCoiners).
Well fear not, folks. The View is going to let you in on the dirty secrets of who and what is really driving the Crypto-Express, and as we love to do: give you the real inside view. So, close your digi-wallet and listen up.
The true FEAR exists in the boardrooms of all the big banking institutions of all kinds, with the smartest people in every one of their division. There is fear in our Congress, on K-Street among the lobbyists, Parliament in the UK, in Central Banks in every major economy the world over, in every country’s military upper echelons, and government or private Think-Tanks all over the world. Missing out on a potential Trillion-dollar industry will “virtually” guarantee that something REAL is going to come of it. This craze is going nowhere, fast but to the onramp on the road to legitimacy. Bank on it.
We at The View know from personal experience with the regulators, back in Forex’s glory days in the 80’s and 90’s when FX was unregulated but moving into its own sphere of legitimacy, that every government, usually beginning with the “trailblazers of the fee-state” (the good-ol’ USA), knows that to Regulate is to Collect. “Fees, that is. Green Gold. The Free-Market sugar in the Government Tea”. Yeah, we know the drill, because we were there when our Uncle Sam was closing (deserving) Bucket Shops at a rate of a few every week.
Well, guess what? The Cryptocurrency industry is going to get theirs, right where it counts. And this is merely the beginning. Let’s give you the signs that we saw:
It began last September with the news that China, of all places, was going to halt trading of crypto coinage altogether. This is the same Chi-Comm run, State-owned “Free Marketplace” that can simply close a bank by shuttering their doors with military intervention if necessary. They then confiscate their “ill-gotten” funds and redistribute them among the more “deserving” institutions within their so-called free market. Note that this little fact-nugget never makes the news, though …. only the headline that Government is looking out for YOU, their weak and foolish citizen-contributor.
So, what do the Chinese politburo know that you don’t? THIS: That there is a darned-good Yuan to be made by regulating the crypto market, in their case by whatever means necessary. In real free markets such as those overseen by OUR Great Leader in regulatory taxation, the US Regulators, nothing will necessarily be confiscated unless it can be proven that it is via ill-gotten gains or derived from a criminal enterprise who commits a tort upon an otherwise unsuspecting public. It is this artifice upon which the marketplace will now and forever be the subject of increasing regulation and its secondary MO: the collecting of a usage tax.
So, the Chinese gave us the first clue this was going to be seriously huge. And the real deal. Then, once this new-wave FOMO hit the US boardrooms, publicly, I got my game on and like many others, began the process of looking under the covers at this sleeping giant. Then, what hit the headlines? That many CEO-types, particularly those whose main businesses are based upon so-called Fiat Currency-based trading and/or transactions and their subsequent fees, who were the first out of the gate to criticize this digital trading craze sweeping the common-man (see Jamie Dimon at JPM Chase), were now hedging their public bets against crypto.
My doubts were permanently erased in earnest last December with the opening of Bitcoin derivative contracts on the CBOE (the “mini-contract”) and followed in a week by the big-boy contract on the Big Brother of derivative access, the Chicago Mercantile Exchange’s (electronic) Globex global clearinghouse of Futures Contracts. As a former member of that exchange back in the open-outcry days, I have nothing but respect for the job they have done centralizing the once-chaotic marketplace of electronic clearing, and its distribution globally. They do NOT open new business without vetting their product carefully, either.
At the proverbial end-of-the-day, offering a regulated derivatives marketplace for what masqueraded as a wide-open Financial Marrakesh-bazaar (caveat emptor) is a GOOD thing. It leads to the safety of funds, transparency of both price discovery and delivery of the underlying goods/services, and most importantly, monster fines and a shutdown for the perpetrators of the underlying financial crimes of peddling the sales of bogus product to an unsuspecting public.
This is completely irrespective of the fact that said public might just be as greedy as the perps. God and Government are here to protect the weaker of any species. Greed be damned. We all want to make a good buck, right? All you need to cement the greed factor into the fantastic new world of the Crypto Coin-of-the-day is the Fact of Failure of so many of them and the “exchanges” they are traded upon. (THAT will be the subject of a couple of futures columns, guaranteed).
But back to our fact-analysis. It’s important to know that merely because cryptocurrency transactions are steeped in Blockchain technology does NOT guarantee that the next ICO offering will be legit, nor does it guarantee that the roughly 1500 “legitimately” listed and trading alt-coins will NOT, in fact, be run as a pure scam. You have no guarantee, for the most part currently, that they will NOT be non-deliverable, non-fungible, unprotected nonsense, built only to separate hard-earned funds from literally anyone with a digital wallet. Buyer beware, always.
The existing or potential victims are our intended audience here, and yes, you all have that potential regardless of the original motive for owning crypto. Whether hard-working Mom-and-Pop families, businesses, institutions large and small, criminal enterprises, wealthy individuals looking to capitalize on a fast-turning wild-west-show of a market, or just someone with a few hundred bucks and a flair for something exotic …. in every case, you really don’t have anything but a hunch, word-of-mouth, and the faith in the universal fellowship of greed that you remain insulated from financial harm simply because this tech is light-years from the old pump-and-dump days.
Transactional safety? Sure. Blockchain is absolutely the future of a glorious, safe financial world of ledgering and deal-making. It is virtually guaranteed to change (our) Trading World and many other industries for the better, and for decades to come. That said, do NOT be confused by today’s youthful exuberance in the crypto coin market just yet. Sitting aside for now might just be THE prudent point of view, particularly against the backdrop of an industry-wide, roughly 60% drawdown in value in a short 4 weeks in 2018.
Blame the derivatives market, and the healthy dose of skepticism throughout my world of media reportage these days – but most of all, blame my claim, baby: that the REAL FOMO lies squarely in the industry of HUGE MONEY, and the race to the participatory Top of the Hill is just now starting.
When the first big-boy/big-girl Investment Bank gave notice that they were exploring the conversion of an in-house trading entity to a cryptocurrency operation at the end of 2017, all bets were officially on again. Goldman Sachs was NOT going to miss out on their share of the many hundreds of billions in capitalization, so they announced what we suspected all along, and then publicly claimed will be the seminal stages of the creation of a new institutional awakening. Welcome to something new: perhaps the first Crypto Hedge Fund, proprietary trading desk, and the reordering of their Capital Markets to apply their multi-talented work force to the creation of Crypto Debt, major fund-raising, and the future of crypto financing. We can read between their “exploratory” headlines.
Since that announcement a few short weeks ago, Jamie Dimon has made similar capitulations to a banking future that contains a dose of Cryptocurrency at its core. Blackrock is onboard. Other major banking and non-bank institutions are all over it. On the other hand, and in a nod to legitimizing the industry, the government of India has announced a crackdown on cryptocurrency-financed potentially illegitimate transactions. This is a signal that central banks are jumping on board.
We find out just this Superbowl weekend that JP Morgan Chase AND the UK’s Lloyds Band will cease allowing their credit cards to be used in the purchase of bitcoin – the current Big Daddy of legit crypto. Why? Again, it’s their industry’s FOMO: the fact that they are, in fact, getting in it to stay – but that they need to keep it off their balance sheets until they can properly vet their own digital participation – or PDD (plausible digital deniability).
The creation of oversight and agencies running governance over major currency commerce, hinted by statements such as (the US Treasury’s head) Steven Mnuchin’s announcement that the G20 nations will begin working together to make sure that Bitcoin and the “major” Altcoins are properly regulated – is the harbinger of a sea-change in the universe of cryptocurrency.
In conclusion, welcome to the front door that leads down into the rabbit hole of the rest of your digital trading odyssey. This Fear of Missing Out on the safe creation and distribution of Cryptocurrencies – and its subsequent tithing to the Lords of the Crypto Finance-Future – is something we might be ironically scared to death of yet thrilled to be heralding in, both at precisely the same time. I know I am. Consider it my own kind of FOMO.
This IS the future and now that’s it been relegated to the great Halls of International Finance … honestly this bodes WELL (you’ll just have to take my word for it) for investors both large AND small. This is the unique and frightening World of the Regulatory Ocean, and which is the raison d’etre for the existence of all the alphabet agencies such as the SEC, NFA, FINRA, CFTC, FDIC, OCC, FSA & ad-infinitum, to begin with.
Don’t be frightened by the G-or-T-Men, unless you have good reason to. That wisdom has served me well over the years when looking temptation in the eye with numerous opportunities to profit on the backs of customers, clients, and just plain-old chumps with a lot of greed-based dough. For me, personally, deferring and staying honest kept me lighter in the wallet, but sleeping well at night.
And keep coming back here to The View on LaSalle Street for the inside track on developments on the mainstreaming of digital currency creation and trading of its subsequent derivatives markets. My readers know that AOR (Anticipation of Regulation) is precisely the reason many of you good people who are cryptocurrency owners have endured some negative drama in your holdings of late. We know or suspect most of those reasons, and then some.
We will be watching, and we’ll continue to expose those stories for what they really are: the normalization of what has been widely reported as a “bubble” but what we understand is a reality of a coming wide and general acceptance that the future of trading is being forever transformed by both the genius AND the depravity of this new space-age tech, its basement progenitor-hackers, and the genius of blockchain.
Cool people, welcome to the New World. I know I’m excited.
William “ChicagoBill” Hoerter has worked in the financial services (Spot FX, Futures and Options) for 35 years, proving that old men may still be semi-lucid and analytical. In working on trading desks, he used to be the enemy but now helps those of us who love to trade understand the mindset of the Institutions and their counter-programming of the system against the average trader.
His new View from LaSalle Street is an attempt at helping to clear those misdirections.
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