Misplaced crypto schadenfreude
“What these hucksters call Web3 is the digital equivalent of essential oils. Blockchain apps have no real productive use beyond selling them to each other. Calling the whole thing Web3 was a fairly transparent grasp at trying to legitimize the whole charade.” – Hacker News
“Crypto was sold as the hedge against inflation. Well, how did that go? Inflation started creeping up and crypto crashed. That's not the hedge I'm looking for.” – Hacker News
“After failing to solve the financial system with crypto and digital rights with NFTs the desperate search of a solution seeking a problem moves on to Web3. Hint: it's not here either.” – Hacker News
Misplaced Crypto Schadenfreude
Whenever bitcoin and crypto crash, its critics come out to celebrate. The critics view the falling price as validation of their criticism. Finally, the market sees that bitcoin and crypto are a scam, and that web3 is useless.
This is crypto schadenfreude.
This schadenfreude is misplaced. It tricks the critics into thinking they are were right all along, and they miss out on huge opportunities in crypto. The best time to get into crypto is during a bear market. This holds for investors, and it also holds for founders.
Critic and Booster Psychology
Nobody thinks they are stupid. It would be stupid to miss out on a 100x investment opportunity. Crypto critics need to reconcile these two conflicting ideas: “I’m not stupid” and “I missed out on 100x gains.” A crypto downturn provides them with a cathartic opportunity to brag “I told you so.”
During crypto bull runs, boosters aggressively taunt critics. “Have fun being poor” is a common taunt. This taunting builds up in the critics, who become resentful and angry at the critics. Until the price goes down, however, the critics cannot retort. The resentment builds up and is released when the crypto market experiences a correction. During the correction, the roles reverse. The critics aggressively taunt the boosters.
Mt Gox Schadenfreude and Recovery
In 2014 the Mt Gox exchange lost 850,000 BTC to a hack. Bitcoin critics celebrated, and the price crashed from over $1,000 to under $150. It's cool to be a crypto critic when the price is crashing.
In reality, this was a perfect time to open a bitcoin exchange. The collapse of Mt Gox opened the field for reliable exchanges with good uptime and strong security. Kraken created an innovative proof of reserves product. Coinbase maintains the vast majority of its reserves in cold storage. “Not Your Keys, Not Your Crypto” is a product of the Mt Gox collapse.
Anyone who thought the Mt Gox collapse was a death note for crypto missed out on a great investment opportunity.
Liquidation Waterfall and Ponzi Collapse
The 2022 crypto crash is defined by two forces: a collapse of Ponzis like Terra Luna, and liquidation chains that push price down. The former erased $19 billion in stablecoin over three days, and the latter is bringing Three Arrows Capital and Celsius to their knees. The total market cap of crypto is down by half.
Critics are again celebrating the death of crypto. In reality, this is another great time to invest in crypto, and found a company in crypto. If you’re looking for a crypto idea, the causes of this collapse will be the problems you need to solve to hit it big time. How can you solve liquidation chains destroying billion dollar crypto hedge funds? And how can you solve ponzis draining retail investors wallets? Figure it out and there’s a huge payoff.
When someone dies in NFL, it’s a tragedy. When someone dies in UFC, it’s a blood sport.
Tech growth stocks are down massively from their peaks. Netflix is down 70%, Zoom is down 80%, Shopify is down 80%, Pinterest is down 80%, and so on.
The cause of this volatility is US government policy to spend $6 trillion in borrowed money over the course of a year, and Federal Reserve policy to keep interest rates near zero for over a decade.
The previous financial meltdown in 2008 was caused by US government policy to encourage unsafe housing loans, overly risk bets by traditional finance, and was bailed out by the US government and the Federal Reserve.
Go back a hundred years, and you’ll see a hundred years of financial crises caused by government policy, and associated bail outs. It is not as if the legacy system is some paragon of stability. Crypto is competing with a terrible system that fails on a regular basis.
The traditional financial system is a geriatric with no chance of improvement. Crypto is a literal teenager and improving daily. The biggest crypto exchange, Binance, was founded in 2017, and lived through an 80% drawdown in its first year of existence. Will the next big crypto project come out of the 2022 collapse?