The Threat of the Crypto-Whales,
Why 2018 will be the Year of Regulation in the Cyberworld
Whales are the largest animals on Earth, and many kinds of whales live from eating one of the smallest animals, plankton.
I have used this example in many presentations; at banking conferences, I point to banks being the whales and needing to take care of the Small to Medium-size Enterprises (SMEs) as they are the plankton that the banks survive on, rather than solely focusing
on the largest of corporations.
I have used this example at FinTech and Cryptocurrency events showing that if small companies and people who represent the bulk of bank clients gather together they can starve a whale, as they are the plankton.
This is all well and good and true, but today there is the growth of whales of a new kind. For now, those new wales have even stronger control over the plankton on which they feed.
The new breed of whale, is not the banks or governments, but the Crypto-whale.
These are even more dangerous and have control of a world that the banks and governments have yet to venture much into.
Crypto-whales will tell you that Bitcoin and other crypto-coins are the salvation of the world. In fact, they have an interest in eating the little people – including you and me.
These whales are a new breed to the world and not understood, but they have their interests at heart and have no belief system except that which benefits them.
They are generally narrow-minded and politically correct – which is something they remind the honest working man of all the time.
Their culture resembles that of the Robber Barons who dominated the United States economy at the turn of the 20th century in that they flaunt their power and vilify anyone who believes that regulation is needed for the Cryptocurrency world.
In fact, the Crypto-whales are fully against any form of regulation. They come with the will and now money to fight against it.
This is wrong. In today’s world technology is more important than railroads, electricity, and oil ever were. Our lives are dependent on technology. As we become more dependent on the Crypto world, we will become more controlled by the Crypto world.
Do not misunderstand me as I am excited by and fully in favor of the fantastic innovation that the Crypto world has brought. There is great potential for reduced cost, everyday use and reduction of crime that cryptocurrency and other Blockchain-based solutions
However, I am very concerned about the potential for abuse of power by the Crypto-whales, the few people that really dominate the new technology.
J. Paul Getty was once the richest man in the world. However, even with adjustment for inflation, he would be way down the list of today’s billionaires. In California alone, there are 53 technology billionaires out of the 78 in the United States that can
be clearly identified.
That list would likely be larger if there was transparency into the holders of Bitcoin fortunes. At the turn of the 20th Century, the Robber Barons were elite wealth villains that were depicted as taking advantage of the working class.
A similar situation is developing today. When we start integrating the Internet of Things (IoT) with smart houses and cars, the Robber Barons of today will have an even deeper hold on our lives. This will be particularly true of Crypto-whales because crypto-currencies
will increasingly be the mediums of exchange used within the IOT.
Today these Crypto-whales control the Bitcoin market with no restraint. the numbers I have seen, which are hard to measure with accuracy, say that about 5% of the owners of Bitcoin control 60% of the Bitcoins or more. They are easily able to manipulate the
price and market for Bitcoin and do so regularly to their advantage.
Here is the most common example. Say the price of Bitcoin is $10,000 and some of that 5% put in big sell orders: well the price goes down and is aided by the many small people who panic and sell.
Then, when the prices goes down to say $9,000, the Crypto-whales buy back their positions. Each and every time they do this, they increase the number of Bitcoins they own, giving them further control.
Even the most amoral or corrupt government in the world is unable to manipulate the value of its currency in foreign exchange markets the way that the Crypto-whales can do with Bitcoins.
As we experienced at the end of last year when the price for Bitcoin quickly rose up to about $19,000 and then dropped as low as $6,000, the only ones who were hurt and lost so much value were the smaller buyers of Bitcoin.
The entire capitalization went from about $800 billion to under $500 billion, which is a real money loss for the small investor majority of over $300 billion. That is huge and has hurt so many people who lost their savings and retirement funds and, in many
cases, greatly increased their credit card debt.
In conventional financial markets, governments rightly put in place regulations to prevent abuse of the many by the few. Those regulations include tax laws which result in everyone paying their fair share. However, the development of the Crypto world through
2017 has been almost totally unregulated. Billions have been made by a small number of crypto-savvy players – some of whom would otherwise be working as waiters or short-order cooks.
I have been outspoken about the need and benefits of proper regulation that is needed to guide the innovation and not stifle it as we have witnessed in the past environments of over-regulation.
Governments are still figuring out the Crypto world and how to regulate it. For now, I believe that the governments are smart enough to see that they must go after the Crypto-whales for much the same reasons that they went after the Robber Barons, prior
to World War I because that is where the money and power resides unfairly.
Let me put this plainly: in the Crypto world, 2018 deserves to be and will be the year of regulation.
Thus far, the lack of regulation has been a very good reason for banks, insurance companies, asset management companies, mutual fund distributors and other mainstream institutions to shun the Crypto world to date.
They have been concerned that if they do something today and regulation comes out differently that they will be in violation and subject to fines and penalties.
Additionally, they are concerned that Bitcoin is now a vehicle of choice for money-laundering, terrorist financing, and ransom payments. Anonymity has always been to the benefit of those with bad intentions even if that intention is just tax avoidance.
Therefore, the imposition of a proper regulatory regime on the Crypto world could be a game changer. It could result in the entry by mainstream institutions.
If cryptocurrencies are to reach their true potential as the currency for the people, by the people and not against the people, then regulation is the way forward to protect the people.
Whales depend on plankton, or they die!