Who is the greater fool?
On Milton Friedman, mysticism, and cryptocurrency market meltdowns
Considerable attention has been paid to the meltdown in cryptocurrency markets, which have succumbed to a combination of contagious panic and empty fundamentals.
■ As a general principle, when people discuss money or investments using the language of mysticism, cloaking their discussions in priestly words, that's a very good sign that they're up to no good. When they then turn to recruiting a mass audience -- as cryptocurrencies did with Super Bowl advertising -- the dispassionate observer can be virtually certain that the situation is about to turn ugly.
■ Extremely intelligent money-minded people like Milton and Rose Friedman, Jack Bogle, and Warren Buffett have used clear, plain language to try to explain economics, finance, and investing in terms that make sense at about an 8th grade level. Buffett's famous annual letters are written with smart but non-specialist readers in mind. The people who seek to explain these important matters clearly tend to be on the side of good.
■ On the other side are the people who suggest mystical nonsense -- like the idea that you can tell when to buy stocks by reading charts as if divining the entrails of a chicken, or who write patent gibberish about cryptocoins, like this: "The price stabilization mechanism is absorbing UST supply (over 10% of total supply), but the cost of absorbing so much stablecoins at the same time has stretched out the on-chain swap spread to 40%, and Luna price has diminished dramatically absorbing the arbs."
■ Money can be complicated, to be certain. But exchange is also one of the most basic forms of human behavior. Nobody who seeks to make investing seem more complicated or awash in mystery is really on your side.
■ There are certainly cases in which cryptocurrencies have their merits, and perhaps we will see an evolution that will clear the brush of con artists and thieves. But at least for the future we can currently see, the market is contaminated by opportunists, speculators, and those who have much to gain by finding greater fools to enter the game.