The only thing keeping me afloat lately is Stanley Tucci’s CNN culinary travel series Stanley Tucci: Searching for Italy. If you are unfamiliar, the show follows Mr. Tucci as he wanders through various regions of Italy – found either sipping aperitivos or eating in cramped family restaurants – unmasked and unfettered.
The New Yorker put it best when they said: Italy is beautiful. The food of Italy is beautiful. Not insignificantly, Stanley Tucci is beautiful, too.
And to further sanctify what may be the best revelation of 2020/21: At the age of sixty, Tucci is enjoying a somewhat unexpected late-career reinvention as a sex symbol.
(Students of the Tucci allure know that this is in no way new – it dates back to his appearance in a 1980’s ad for Levi’s 501’s). Nevertheless, life becomes simple when watching Stanley Tucci meander around Italy.
What does this have to do with last week’s crypto crash you ask? Literally nothing at all. I tried to find a through-line between Searching for Italy and the crypto market but quickly realized that comparison would be as offensive as the cohort of people who only started recognizing Tucci’s charm from his 2020 viral Instagram video where he assembles a Negroni.
If you’ve been living under a rock – or more likely a social media feed sans anyone in the financial industry (keep it that way), I have news for you:
Both Bitcoin (the largest cryptocurrency) and Ether (the 2nd largest cryptocurrency) took a tumble last week.
Cryptocurrency is what’s known as a speculative asset. In simpler words, speculation is the purchase of an asset (commodity, real estate, goods…) with the hope that it will become more valuable in the future. Modern interpretation usually includes a correlation with high risk. It is of note that many speculators pay little attention to the fundamental value of a security (real-world worth, usually related to the veracity of the business model etc.) and instead focus purely on the technical’s (price movements, charts, other boring things). Or, more disturbingly, speculate based on what Elon Musk tweets about and then following suit (more on this to come).
This speculation is what accounts for my favorite adjective to describe my sister – volatility.
Some crypto experts say that last week’s volatility is normal and is to be expected from such a speculative asset class. Others consider this crash a long overdue reckoning for these wildly overvalued crypto stocks (Dogecoin, anyone?).
Why the Crash?
1. China’s Announcement
The recent declines in Bitcoin and other digital currencies dramatically worsened after last week. On Tuesday, the Chinese government announced that bank and payment institutions cannot conduct business related to cryptocurrencies. The guidelines, which reiterate a previous Bitcoin ban from 2017, bar financial institutions from accepting or using cryptocurrencies in payments or settlements.
The announcement was released by 3 fancy organizations with 3 intimidating names: the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China. This trio laid into the crypto market’s aforementioned volatility, arguing that virtual currency is “not a real currency”, has “no real support value”, and the price of digital tokens are “extremely easy” to manipulate.
*The value of the world’s cryptocurrencies dropped about $50 billion immediately after the announcement, pushing the week’s losses to roughly $500 billion from the previous week’s high of above $2.5 trillion. I have no sense of scale with these types of numbers but I imagine you’d be able to live out Stanley Tucci’s Italy vacation for 100,000 lifetimes to come. (But it wouldn’t be with Stanley Tucci, so is there a point? Or maybe, this is the type of money that could buy Stanley Tucci’s company ~ which is deservedly, if you watched that Levi’s ad, worth a $500 billion fortune).
2. US Regulatory Pressure
Gary Gensler, chairman of the Securities and Exchange commission and man whose parents blessed him with dreamy name alliteration, recently said that the U.S. lacks a “regulatory framework for crypto exchanges” where “there’s really no protection against fraud or manipulation”. He further told CNBC, “To the extent that something is a security, the SEC has a lot of authority, and a lot of crypto tokens—I won’t call them ‘cryptocurrencies’ for this moment—are indeed securities.” Gensler has yet to specify what the regulations around crypto exchanges will look like, but the threat of a regulation crackdown has, naturally, affected the market dip.
*The flip side of the coin:
Luke Lloyd, investment strategist, self-described crypto bull and again, man with an alliterative name, told Forbes that government regulations may hurt smaller cryptos “no one has ever heard of” but major digital assets (our headliners Bitcoin and Ethereum) will not be greatly impacted in the long-term from regulation. Lloyd argues that Bitcoin can’t really be regulated “unless the online exchanges are completely banned and made illegal to transact”. Ironically, a bit of regulation and government oversight could be bullish (finance word meaning an asset will rise in value) for Bitcoin as it bestows a level of legitimacy upon it.
3. Elon f*cking Musk
I am so over talking about this man but unfortunately his square head continues to rear itself and thus I am obliged to address his market influence.
Elon Musk’s Twitter page is like walking through the high-school boys locker-room if the boys inside were pretentious, video-game addled and distinctly unathletic. It also smells bad.
On May 12th, he released a statement saying that his company would no longer accept payments in bitcoin due to climate impact concerns. (The word hypocritical does not begin to cover this – if you’ve done any reading on his lifestyle or business models, you know the man could care less about the kind of Earth his seven children will be inheriting).
On May 19th he changed his tune amid the market chaos confirming his support for bitcoin with the tweet: “Tesla has the [diamond emoji] [prayer hands emoji]” and further writing “Credit to our Master of Coin”. I cannot explain the diamond hand thing, I really don’t get it. I just know that it refers to Bitcoin because its stock price jumped back up after this Tweet went out. The man is out here just asking for the SEC to investigate him for market manipulation.
Luke Lloyd spoke of Musk’s influence on the crypto market:
“Elon Musk… is the best salesman in the world with a cult-like following. Whatever Musk says is like divine words for a lot of people. But it’s not just about Musk. It’s what is perceived will happen when people like Musk get involved and either take a bullish or bearish stance towards crypto. Once Musk added Bitcoin to the balance sheet of Tesla, many investors thought many other companies would follow. It was that perception–[instead of] Musk buying Bitcoin–that drove Bitcoin higher.”
A Symphony of Erratic Opinion:
Crypto investor Mike Novogratz: “Now we’ve got a liquidation event…Humpty Dumpty never gets put back together in two days…when he cracks. It’s going to take a while. The market will consolidate. It will find a bottom somewhere.”
Bernstein analyst Harshita Rawat recently stated that government crackdown on cryptocurrencies could potentially “trigger another ‘crypto winter’ and reduce trading activity.”
Tom Brady tweeted, “Over here we just buy the dip!”
The crypto market is a topic far less attractive than cheesemakers, petals of artichoke and, notably, Stanley Tucci, but people still tend to scream about it nonetheless. If this article (post Tucci swoon) has relayed any sort of sentiment on the crypto market, I hope it to be that of chaos. Because, as the financial advisor I am not, my unsolicited opinion is to not touch this anarchy with a 10-foot pole unless you have an affinity for high stakes gambling, are a technical wiz (why are you reading my article) or a crypto expert (seriously, why are you reading my article), or have a huge trust fund you’re willing to lose (marry me). And if by some strange persuasion you are devoted to the crypto market anyways, try looking at companies like Cardano or IOTA whose sole purpose isn’t to decimate the planet.
Crypto investing in a nutshell: some are stressed, some are bullish, and some think it amusing to bank their life savings off of an unstable tweet by Elon Musk.
Until next week.
And until then, if you want a more professional/technical/all-together probably more reliable look at what’s what in the cryptocurrency world, read my coworkers’ piece here.