Greed is good
During the recent Lunar New Year reunion dinner, a crypto skeptic relative took a dump on crypto. He shared his ideas on the importance of trusting the government over money because they provide a sense of stability that crypto does not.
He mentioned that Bitcoin is over because it has accumulated far too much, how the whales are done pumping it over the years. He continued by stating that several well-known investors, such as Alan Buffett, have been harshly critical of Bitcoin and other cryptocurrencies, claiming that cryptos are not real assets and that their value is mostly speculative and driven by market hype.
I stopped listening to him instantly as he mispronounced big daddy Buffett’s name. So much for credibility..
I recently watched a Netflix documentary on the rise and collapse of financier Bernie Madoff, who orchestrated one of Wall Street’s largest Ponzi scams.
The Securities and Exchange Commission (SEC), as detailed in the series, is an independent body of the United States federal government responsible for regulating the securities markets and safeguarding investors. Nonetheless, despite its critical function, the SEC has come under fire for its apparent inability to detect and prevent financial misconduct. Over the years, the SEC received countless reports and warnings about Madoff’s questionable behavior but did not act until it was too late.
Furthermore, the SEC has come under fire for apparent bias toward major financial firms and a lack of enforcement action against executives who commit financial crime. This has raised concerns about the financial system’s accountability and transparency.
Perhaps they should rethink whether regulatory enforcement is effective.
The following are my opinion and I hope it will give you some insight, it’s probably nothing.
DeFi is the answer to the SEC and traditional banking institutions’ trust difficulties. DeFi runs on a decentralized, transparent network that everyone can monitor and verify its transactions. It is independent of the traditional financial system and is not governed by governments or central banks. This lessens our need to rely on regulators like the SEC for protection. I won’t underline the benefits of DeFi in this writing because I’ve written about it several times; please see my page for such content:
On a personal level, watching the Madoff series reinforces the essential lessons learned last year. As shown in the documentary several times, financial market has a tendency to attain a level of euphoria during bull markets and capitulation during bear markets. Because markets are driven by the aggregate behavior of millions of investors, this is the case.
Financial markets are unpredictable and ever-changing. Its fluctuations can lead us to feel a sense of fear of missing out (FOMO) when the market is on the rise. We often fail to manage the downside risk because we are blinded on the potential gains. Hence, I think it is critical to avoid fighting the Fed not just this time but every time. Instead, we should be discipline and to always remain calm, gradually deploying into the times of fear in order to potentially gain from the market’s general upward direction.
Finally, the lesson of the story, as everyone says, is due diligence, which entails properly studying and assessing investment prospects before committing money. No one will tell you, however, how difficult it might be to put into practice due to the effect of greed, which is a natural human nature. Greed may cloud judgment and cause us to disregard warning signs or overlook possible hazards in our pursuit of large profits. This might lead to rash investment decisions that are not founded on a thorough comprehension of the investment opportunity or market conditions.
Greed can also make us more vulnerable to ponzi schemes since we are more prone to overlook warning indications or red flags in our quest of large profits. This was obvious in the instance of Terra Luna, CeDeFi, etc, where we were lured by the promise of very large profits but neglected to adequately examine or evaluate the downside risks.
Cheers to not losing money this year!
Thanks for reading, please follow me if you enjoy the way I write and stay tuned for more crypto & DeFi content!
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