Wednesday, December 30, 2020

Ripple vs SEC: has the elimination of the crypto Ponzi schemes begun?

PF 2021

The cryptocurrency world isn't just a part of the criminal underground. It is something worse, a top symbol of the absolute degeneration of the Millennial generation. A proper organized criminal knows that he is cheeky, he is doing something wrong, but it's fun. The Bitcoin Millennials are worse. They have convinced themselves that by redefining the reality, they are virtuous. Holy cow, I hate them.

The intrinsic price of one Bitcoin is self-evidently zero. It's true by definition. There are no material assets or rights hiding behind the record in the Bitcoin ledger. How do the Bitcoin Millennials react to this point? They tell you that the value of anything is relative, a result of social conventions, and when many of them believe that one Bitcoin is worth $28,000, it's just worth $28,000. The value is absolutely relative. What's worse: the truth is about everything is absolutely relative for them. The cryptocurrency trading is an example of the absolute victory of moral relativism and postmodernism within this fudged-up cohort. They are a hopelessly brainwashed stupid herd of sheep who are also staggeringly poor, too lame to study the matrix model, and too flabby to defend the nation according to the U.S. generals.

OK, the Bitcoin and its 8139 clones is a system to keep the records about the legitimate transactions in a decentralized way – the price is the huge amount of electricity that fundamentally needs to be spent because this complete waste is what makes one ledger more legitimate than others. And the decentralization is just a meme. What is true is that the users generally don't care who the miners are and which clique is the majority. But the identity of the miners still exists and they may be very centralized! 80% of the Bitcoin minining occurs in the communist China which, given the lack of de iure freedom in that country, means that the Chinese Communist Party is the ultimate owner and manager of the world's Bitcoin. The Western users and promoters of the Bitcoin are really traitors.

At some level, we may say that whoever has wasted a bigger amount of electricity for solving useless cryptographic problems (and the Bitcoin consumes as much as the Czech Republic now!), has the right to decide which (recent) transactions count and which don't while the following miners are automatically encouraged to recognize the previous victorious versions of the ledger. Aside from these practically irrelevant questions about "which transactions are valid" (and you must know that these issues are almost never relevant in your real world banking because if someone robs you, you can fight, so people generally don't rob by fabricating the list of transactions), the Bitcoin is just a pyramid scheme, a bubble, a canonical example of a community that switches from doing interesting and useful things to a self-serving waste of time, money, and energy. A textbook example of a greater fool's theory. When you buy the Bitcoin, you are robbed, when you sell it, you are robbing. But you know, just because you were robbed doesn't give you the moral right to rob others.

More quantitatively speaking, as I wrote in early 2018, Bitcoin and other scarce cryptocurrencies are stocks in worthless companies that produce nothing and never will. The nonzero subjective value is said to be derived from the scarcity. There are just 18 million Bitcoin and there will never be more than 21 million, the rules and thinking goes (majorities of miners may change the rules). So it must be very precious if there are just 18 million of them.

Needless to say, exactly the same thinking applies to stocks. You have a percentage in a company which is small but what makes this situation valuable is that the percentage is fixed because the number of stocks in a company is also fixed. And if the company increases the number of stocks, it will probably sell the new ones to someone. The company will raise the money, it will get more valuable (the added cash is the difference), so the value of a single stock will drop because the number of stocks went down, but go up because the value of the company increased by the new cash, and it's clear that these two changes will cancel.

Because the Bitcoin quacks like a stock, stinks like a stock, and looks like a stock, it must be treated as a stock. More generally, it is clearly a security and those who raise the money or organize the trading with these securities must obey the usual regulations and submit the usual paperwork. In Czechia, the taxing of crypto profits is treated as profit from "selling things" (like stamps). But no two stamps have a fixed ratio of values. Two Bitcoin will always be equally valuable which is why they're analogous to currencies, bonds, or stocks, not to things.

It is clear that virtually everyone who creates the new cryptocurrency, sells them, or allows others to trade them is violating almost all rules for securities. (Also, most people don't tax their profits from crypto although it has already been made clear in most countries that they are breaking the law.) They are mostly Millennials, spoiled brats who believe that they are entitled to all sorts of exceptions and to the redefinition of the truth about everything. A Millennial pervert with a penis in between his legs may decide that he is a woman and to feel comfortable, he needs the remaining 8 billion people to live a life in a lie and call him a woman although he is demonstrably (and often self-evidently) a man. So he redefines his sex, why not? In the same way, he may redefine the overall value of the Bitcoin from zero to half a trillion dollars, or Tesla Inc. from approximately $1 billion to half a trillion, too. (The situations of the Tesla and Bitcoin Ponzi schemes are about 99.9% identical; Tesla justifies a tiny fraction, about 0.1%, by producing average cars in a niche market.) The Millennials are all about the redefinition motivated by their better... feelings. So they may also redefine the status of their crypto so that they're not any securities at all, are they?

You may only redefine all these things in your defective brain, Millennial f@gs. The truth isn't changed. Cryptocurrencies are worthless, and worthless securities. People buying them are morons and if they make a profit by trading them, they are criminals. They are on par with those who print counterfeit money. The situations are really isomorphic. You print something that is self-evidently (and according to the deep recognized rules and traditions of the society) absolutely worthless but you fool someone that it is real money and he actually pays real money to you!

Finally, let's get to the recent events. The U.S. Securities and Exchange Commission, the American regulator of securities and trading with them, has sued Ripple Labs Inc. Read the complaint here. The reason is that they raised money by selling Ripple coins, which are clearly securities, but they did none of the duties associated with these operations with securities (like informing the buyers about the risks etc.). While the price dropped by 2/3 and many crypto-exchanges including Coinbase and Bittrex announced the elimination of Ripple, the Ripple company responded with an incredibly arrogant statement. The SEC demands the Ripple people to stop selling XRP, abandon all illegitimate gains, pay some civil penalties, and more.

According to CoinMarketCap, Ripple is currently the #4 cryptocurrency out of 8140 cryptocurrencies, after Bitcoin, Ethereum, and U.S. Dollar Tether. The Ripple capitalization is about $10 billion right now which is 45 billion Ripples times $0.22 per Ripple. That price dropped from some $0.6 two days ago or so, and from almost $4 in March 2018. The founder Chris Larsen has a substantial fraction of these Ripples so he is a virtual billionaire. OK, this empty chap thought he had X billion dollars and suddenly two-thirds of this hot air was subtracted by a lawsuit from the SEC. Because he apparently really believes that he is entitled to be a billionaire for doing nothing useful, just brainwashing the Millennials that his cryptocurrency is worth a lot, he feels upset. The SEC must be wrong, right?

I mean, the SEC ultimately decides what a security is. And a random person or company mustn't be allowed to avoid the regulation just by claiming that they are doing something totally new, futuristic, with new mumbo jumbo words. If it smells like a security, quacks like a security, and looks like a security, it is a security and it's the duty of the SEC to regulate it. Of course if some mumbo jumbo terminology (or a particular database software to keep track of the shareholders) were enough to avoid the regulation, people would have done it for decades or centuries. It's not enough. The regulators have only accidentally ignored this criminal activity for a few years, much like a cop may overlook a chap stealing chocolate in a supermarket for a few years.

The analogies with stocks are perfect. The miners are issuers of new stocks. They are sold for dollars which is nothing else than a company raising the money by selling new stocks. So each miner is really performing an IPO of himself, or a piece of it, and must be regulated as such. If some decentralization or crypto mumbo jumbo were enough to escape the regulation, literally everyone could do it because it is always straightforward to rename your stocks as a cryptocurrency, and run a program to remember the blockchain for the stocks' owners, to make it really identical. It doesn't matter how you remember the owners of your stocks. You are issuing stocks, pieces of a whole that have the same price as other pieces because that is what is implied by its being a security, a record remembering how many pieces various owners have.

Chris Larsen should really be grateful to the society if he doesn't spend the rest of his life in the jail because what he has done is equivalent to selling several billions worth of counterfeit banknotes into circulation.

Ripple was chosen as the target of the SEC lawsuit because it's the most company-like and most centralized cryptocurrency which also implies the information asymmetry, as the SEC notes, that the Ripple criminals are using to rob the other users of the security. In some sense, it is a hybrid between regular securities and cryptocurrencies (which has allowed Ripple to make faster partnerships with companies from our good old regular world). But at the end, every other cryptocurrency is centralized to some extent – has dominant miners, dominant cryptoexchanges, dominant owners of the coins, and so on – and even if it were perfectly decentralized, it just shouldn't make a difference because decentralization mustn't become an effective trick to escape the vital laws of a country.

The reactions of the crypto sheep to the lawsuit are rather amazing. It's not a security! Only Charles Ponzi and not the SEC has the right to determine whether his products are securities or Ponzi schemes. And so on. Funny. This tweet also made me laugh out hard:

The stupid Ripple holders don't understand the centralization because the price lost over 60%. If they understood the decentralization, the price wouldn't drop, the Twitter pundit tells us. It's just amazing how dumb some people are. The price dropped because the SEC is in the process of making it clear that it considers most of the activities surrounding Ripple to be criminal; in practice, places to legally and conveniently sell and buy the Ripple are evaporating. Because most people don't want to spend years in the jail, they don't want to be trading with an illegal object, whatever you call it. So they sell it and the price crashes due to the excess of supply over demand on the original, excessive price. Is that really hard to understand? (These Millennials really don't understand even the basic tenets of the "rational economic reasoning"; at the level of cohorts, mankind is undergoing a paradigm shift towards a completely irrational economy where the mathematical laws of economics don't apply and you need to study the dynamics through psychiatry instead.) To say the least, it's clear that the Coinbase holders have to move their XRP out before Coinbase stops trading them (because they will literally be locked but not destroyed, you may move them elsewhere); a part of them clearly saves the funds by an instant conversion which is why the XRP price went down. If you can't effectively extract dollars out of the "currency", it becomes useless.

What actually shows the immense stupidity of the cryptocurrency holders is that the remaining 8139 cryptocurrencies haven't dropped a similar 60+ percent yet, and that the drop was just 60%. Ripple is a test. The SEC and central banks really can't afford these insane Ponzi schemes to grow further because they are becoming a non-negligible part of not only the energy consumption of the world but also of the financial markets ($0.74 trillion for all the cryptocurrencies right now). They are becoming huge systemic problems completely distorting the healthy allocation of the capital; they are gradually destroying capitalism (not that they are the only things that are doing so now) because they send hundreds of billions of dollars (and the corresponding fraction of people's time) to the people who are doing nothing useful at all. For example, if the Bitcoin grows just 35 times in a day, John McAfee won't need to eat his dick on live TV because he promised a $1 million Bitcoin by the end of 2020, otherwise he would eat that organ of his.

The SEC just picked one target to test what is going to happen. I think that it works fine. The U.S. regulator (and its counterparts in other countries) may simply criminalize and deflate all these 8140 Ponzi schemes, the process will be smooth. I agree with this Czech article that if Ripple loses the court battle, almost all other cryptocurrencies will be threatened. And they certainly should.

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