The Breakdown - Ponzi scam selling, Hong Kong protest bank runs & buying creators with internet money

Episode Date: August 15, 2019

Why number go down? That's all anyone was asking as BTC plunged below $10k, a line that, according to Hodlonaut, we'd never cross again. Was it Ponzi scam selling in China or something less sinister? Either way, there was a bit of snark about a safe haven narrative so quickly extinguished. Additionally, we discuss a new move from Ripple to pay creators to come to their content ecosystem and the state of indie media, as well as look at calls from Hong Kong protest leadership for an imminent bank run.  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back to another crypto daily three at three. All right guys, what's going on? Today we're talking about first the price action in Bitcoin. The number went down after kind of like a month of steady ups. And it just reminded us that prices go down. And so we're going to talk about that a little bit. Number two, we're going to talk about programs that are designed to get creators hooked on new platforms by paying them with magic internet money. So that's number two. And then number three, we're going to look at. some interesting new reports out of Hong Kong about protesters calling for a bank run. But let's start with number one, why number go down? So yesterday, over the last couple of days, really, there's been a distinctive turn down in

the Bitcoin price, right after, again, steady upward motion. And if you'll remember a couple weeks ago, at the beginning of the week, all we were talking about was whether Bitcoin was the new safe haven asset and whether it was going to perform in kind of an opposite correlation to the rest of the markets. Well, everything was hammered over the last couple days, including stocks, including bonds, and including Bitcoin, right? And so that seemed to throw a big wrench in that. So I wanted to look first at what people were attributing this to.

Yeah, see you see here, Bitcoin drops to 10K and worst daily loss in a month. So there's a couple different things that people are attributing this to. First, the block is reporting on the Fear and Greene Index for, Bitcoin. Kind of with greed tends to be at the top of the cycle when things are due for a correction. Fear tends to be at the bottom when there's a good buying opportunity. So fear was at its lowest point, for example, it's, it said it was at its lowest point last December. That's when Bitcoin was down in the threes and four thousands. And just last week, the index is really high. So the fear greed index has been particularly volatile lately. But it hit a 24-day low

yesterday. So maybe there's just kind of a interesting correction in terms of what people are thinking. Another theory speculation that was interesting and made it all the way to Zero Hedge, who was apparently back on the crypto beat after ignoring it for a long time during the bear market, they picked up Dovi-Wan's tweets about the potential implications of sell-off from a Ponzi scheme. So long story short, plus token was a Ponzi scheme in China that was actually taken down. A number of its ringleaders are in jail already. But basically, there's this idea that maybe part of the cell pressure had to do with this Ponzi getting rid of its coins.

Now, not everyone was buying this. Lundart here says, I find it very hard to believe that a known Chinese Ponzi scheme with estimated between 75 and 200 BTC can just sell the big. Bitcoin down spot exchange is willy-nilly. Bitcoin is a very public ledger after all, and I imagine the coins are on every blacklist ever. Hashib did an analysis using the information that Dovey provided, also pointing out that she has a good track record of China Insights. And they found a couple things. In their thread, they say, we haven't seen any significant transactions moving out of analyzed wallets in the recent days, except for those 37.9 BTC getting broken up and sent to newly created addresses. And then they say, and I think this is the important point, the recent plunge in BTC calls for a narrative, given how well its price responded just days ago to global macro events, while basically ignoring

the very Bitcoin favoring last 24 hours. Ryan Adams kind of in disbelief said, so this Chinese Ponzi has more ethelocked up than the Ethereum Foundation. This has been known for weeks in the West is just finding out about it. Wow, there's a chasm between East and West crypto communities. So basically, he's making the point that even if this isn't the thing driving the price, that it is fascinating just how much of an information sparity there is between these communities, which I think is undeniably true.

So to the extent that that Ponzi scheme and sell-off from that Ponzi scheme is actually the thing driving the price action, hard to say. But I think that it's interesting that it's there as a narrative. And speaking of narratives, let's return to that safe haven narrative from just last week. Ariana Simpson says, oh, wait, what? I thought the story everyone's been pushing is that Bitcoin and other asset classes were inversely correlated. Or maybe the story is that it's non-correlated. Turns out we have insufficient data to credibly make either claim.

Alex Kruger also goes in and says Bitcoin is a stocks hedge and moves in line with gold as a safe haven asset. Was that not the newfound crypto narrative? And then he says confirmation bias is the tendency to interpret new information as confirmation of existing beliefs. Stories that suit one's bias and generate a warm, fuzzy feeling are generally welcome. Facts, no one cares about those. So there's a lot of this safe haven narrative snark going around yesterday, which is reasonable, it's understandable. But I want to use this as an excuse to talk for just a second about narratives because obviously I spend a huge amount of time on them. So this is actually from my Ethereum presentation earlier this year at Ethereum and during New York Box Chain Week.

And basically, you know, what narratives are simple stories that we use to explain complex phenomena? In crypto, especially where there's, you know, there's a lot of data, but we don't have a lot of historical longitudinal data per se, right? We've only got a decade to deal with. and with most of these assets much less, we cling to narratives extra strongly because of that dearth of patternicity that we have to use, right? So we look to narratives for almost everything.

And the idea here is that every narrative is competing for resources and that when we talk about narratives, we have to understand that to some extent they're marketing, right? And there's a lot of reasons for that. But again, when we're talking about these different narratives, there's a reason that we're doing it. And so the point here that I want to make,

and it looks like this is having a hard time, but the point that I want to make about narratives is that they have the power that we give them, right? So narratives matter, but we have the, we dictate how much power they have. I said here that they have the exact amount of power we give them. And what I mean by that is that when we understand that narratives are, in fact, to some extent, an act of self-fulfilling prophecy, and that narratives are about us trying to

explain the world in such a way that it reifies whatever decisions that we've made or the way that we look at the world. That's not a bad thing, but it should mean that everyone else, whether they believe those narratives or not, should give them a little bit less power to dictate their actions. So to me, what's interesting about this safe haven narrative that was emerging last week wasn't the idea that all of a sudden, right now and from now on, Bitcoin was going to perform as the perfect hedge against other sorts of global instability. What was interesting to me was that in a major way, you saw the convergence of the macro-narrative conversation and the Bitcoin narrative conversation. Those two things were coming together. And it wasn't just about whether,

you know, at every juncture over the next few months, when stocks go down, Bitcoin's going to go up, but looking kind of longitudinally and generationally at what is likely to happen. with a major correction in equities, with a major correction in real estate, where are millennials going to park their money? That's what's getting the macro folks interested in Bitcoin. And so in some ways, even the Safe Haven narrative was, it's a little bit kind of short-termist from where the really interesting thing. So the point here is, again, that these narratives do change, they do shift, and the point here isn't that we shouldn't care about narratives. We just need to recognize them as narratives and understand that we can't give them as much power to

shape our short-term actions. And so I just want to close as it relates to the price action on this tweet from Francis, who I thought was great. When I first got into Bitcoin, we spoke of the 10,000 of the 10,000 milestone in the same way we today speak of the 1 million milestone. The point is it was a very contrarian position to take and made you look like you were taking crazy pills. So again, we are, we're going to go through more cycles, right? It's just inevitable. And I think it's important that in the same way that I'm kind of imploring to not take narratives too seriously or to understand them, be interested in them, but to not let them shape short-term action, the same goes for price action, right? There was another tweet from Tim Poole, who's well-known kind of in

political Twitter and whatever, who said he bought Bitcoins a while ago, hasn't thought about them since, and I think that there's a lot there. But with that, let's move on to number two for the week or for today. So this is a probably a first and will rarely happen on the Crypto Daily 3 at 3, but I am talking about Ripple right now. So Lee over at CoinDesk reported that Ripple is to give away $1 billion in a massive bid to fund online content. And so basically, you know, some of you may have caught that a couple months ago, or maybe it was a month ago, I can't even keep track of time anymore. Ripple basically funded. an investment vis-a-vis coil, this large, this large startup that kind of is in the ripple

ecosystem to invest in Imger, which is a hugely popular, kind of unknown, frankly, a site that hosts a huge amount of the internet's memes. It still has anonymous membership or anonymous usership or whatever, right? And so I was interested in this because, you know, It's less about the ripple piece, right? There's all the details that you can read in terms of how they're going to allocate that money and what they're saying about who's already participating in it. I think what's interesting is that I believe that you're going to see a lot more of this type of battle for content creators with crypto and just money in general, right?

I think that we're likely to see people really aggressively competing for top independent talent. You've seen some examples of this already, right? So for those of you who follow e-sports, Ninja is the biggest streamer in the world. He's the first and I think only Twitch streamer to hit 10 million follows. And recently he announced that he was moving to Mixer, which is a different streaming platform. He was leaving Twitch and moving to Mixer. Mixer is owned by Microsoft. And since he moved, which he just announced this on August 1st, I want to say,

Microsoft's Ninja Acquisition caused downloads to Skyrocket. It doubled basically the number of downloads and users that Mixer was seeing. So that's obviously huge business. And no one knows exactly what the terms of the deal were. Are though interesting intrigue in the e-sports community

as Dr. Disrespect said the deal was bad and Ninja shouldn't have done it. But that's neither here nor there. The interesting thing is that the competition for these independent creators is big business. And I think it goes beyond just the idea of influence. I think that we're shifting kind of irrevocably into an era where independent media creators have channels that compete with in size, scale, and influence traditional media channels.

And in fact, in a lot of cases, you're going to see those independent media creators have the most influence because of their perceived independence, right? I think Joe Rogan is a great example of this. His podcasting platform is entirely owned by him. It's just his thing. And he makes a huge amount of money from it. but he's really not beholden to anyone. Now, certainly he works within an ecosystem,

and there would be implications if he did this or that, but he's radically more independent in some ways than traditional media, and people love that, right? And it's the same in everything, right? If you look in the state of crypto media, there obviously are a handful of publications, and especially now there's a lot more kind of upstarts who are trying to out-compete the incumbents,

but you really have a scenario in an ecosystem where a huge amount of the information and analysis that people get actually comes from independent media creators. I mean, hell, you're watching Crypto Daily 3 at 3 right now with me. And obviously there's, you know, podcasts are hugely important in this space for getting information and so on and so forth. So I think that this idea, this phenomenon of luring creators with payments is really big. And I think it's going to be a key part of the strategy of a lot of different crypto platforms,

not just ripple, right? You see it already with scent, which uses Ethereum as its kind of base. to pull people in and try to build a different type of social network. You've got Steam, obviously, who's been experimenting with this for a couple years. So this is going to be a fundamental part of the crypto ecosystem is seeing if you can accelerate network effects with your own kind of token base. Whether that works or not, I think, is yet to be seen. Creators tend to prize their audience pretty strongly. And if they've structured their kind of life and business, right, a lot of times in the short term,

audience strength and audience size matters even more than than short-term revenue. So something to watch. And with that, we'll move on to number three for today. So I just noticed this almost right before the session, Rhythm Trader, who is like the most pomp-pomp out there at this point in terms of just the killer pithy tweets posted breaking. Hong Kong activists are calling for a run on Chinese banks tomorrow asking that everyone withdraw their money on the same day. One of the best ways to peacefully protest the next step is buying Bitcoin. And so obviously the first thing that I did is I asked what the source was. And lo and behold, again, it was another zero hedge article, which makes me feel a little bit dirty for having two zero hedge references in the same one three at three, but what are you

going to do? So this came from one of the Hong Kong activist leaders. I'm not versed enough to know whether it's what leadership actually looks like for this. And so I don't want to overstate where his place is in the protests. However, it does seem like it's relatively important given the press coverage that it's got. But he basically said that there's worry among those protesters about increasing violence. And so they're looking to alternate strategies. And so they're thinking about a bank run. They're calling for a bank run tomorrow. So it said, this is from the China press. He called on Friday that Hong Kong citizens take out all bank deposits. The primary goal is Chinese banks, but he said other banks should also be targeted.

Otherwise, Chinese banks can borrow money from other banks to solve problems. So, you know, this is a video that I found of that. So there's an actual press conference with people paying attention. So actually, let me pull it up because I forgot Yellow Vest Bank Run before doing this. But this is something that's interesting to me. I spent a lot of time kind of watching civil disobedience and protests around the world. As I said, maybe yesterday or the day before that, I think that this instability and this global, these kind of global shifts in power are a key part of the context for crypto.

And so I watch what their techniques are. And earlier this year in January, we saw the Yellow Vest in France also have something similar. They called for a bank run. And it didn't amount too much. I think there were a bunch of reasons for that. One was that it was hard to kind of get the word out in enough time. Two, there are already pretty strict controls on how much money you can withdraw on any given day, which are designed specifically to prevent bank runs.

Three had to do with just, you know, there was some maintenance that became scheduled real fast among different banks there. But anyways, the interesting thing here is, again, that this idea of bank runs highlights some of the underlying economic issues and control of money issues at the heart of these. protests which are all I think on some ways no matter what they are nominally about on a fundamental and underlying level they're about a frustration and a disbelief in economic futures and a and a belief that something radical needs to shift for opportunity in the future and so that creates a really interesting context to discuss the state of money and the money system and where crypto might come in so you know as I promised earlier I am working on a longer kind of Hong Kong

episode that has some real voices who are on the ground and have experience there and that'll be coming next week but I wanted to highlight it I think it's interesting that we've now seen two different kind of major global civil unrest movements turn and try to activate bank runs at some point whether or not as successful I think is a totally different question but that's it for today's three at three interested to see what you guys think of all this what you think is the reason for the price action hit me up on Twitter at NLW thanks for watching if you're watching, thanks for listening if you're listening, and I will chat to you tomorrow.

Later, guys.