The Worst “Investment” Known to Man. Here’s Why.
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Why do we call it “crapto”? It’s because this “asset class” is rife with scams, fraud, and pump-and-dumps. However, that doesn’t mean all crypto should be discarded. Today, we’ll look to see if there’s some “there there” in the crypto space, starting with a look at the largest cryptocurrencies by market cap.
Probably no technology we’ve looked at has lost more money than blockchain. Anyone remember ICOs – coupons to spend on platforms and services that weren’t built yet? What about NFTs – pictures of monkeys and pixelized rocks? Trash all of it. Now we’re up to about 18,000 different cryptocurrencies. The first half of my career in tech startups, I watched the dot-bomb decimate the tech industry.
The second half of my career, I watched Wall Street get destroyed by the 2008 financial crisis. i know how money gets lost. And crypto is probably one of the worst things I’ve ever seen. But it’s also starting to show some potential. Today I’m going to tell you how not to lose money in crypto. I’ll also show you exactly how we plan to invest in this nascent space.
Why do we call it “crapto”?
Now we’ve been covering blockchain technology for over a decade. We’ve taken a lot of flak for using the term crapto. So let’s discuss that.
This slide was taken from a presentation that we did several years ago. We were pointing to a particularly risky asset. Here, this asset called Luna promised to pay somewhere around 19% interest and our point was simply this: there’s no such thing as a free lunch and this should be avoided like the plague.
Now the firm offering this, Binance, still happens to be one of the top cryptocurrency exchanges out there. Here you can see the list.
So what ended up happening is that Luna cryptocurrency experienced a catastrophic collapse in May of 2022. That was fairly predictable and Binance the firm that was offering that risky product, several years ago, their CEO plead guilty to federal charges. They had engaged in activities relating to anti-money laundering, unlicensed money transmission, sanctioned violations.
This was the largest corporate resolution to include criminal charges for an executive. Now that’s not a good thing. These are big red flags. And people will be quick to say, Well, that was then, this is now. Well, let’s just remember this was only a couple years ago. But let’s assume we’re all past that now and that the asset class is showing some signs of maturity. Which it is. I wanted to turn to a firm that has released some very interesting factoids about the cryptocurrency space. So this is CoinGecko and based on their profile photo here, they appear to be either out of Hong Kong or Singapore.
They want to – and this is always a red flag – democratize access to cryptocurrency data. So whenever somebody says they’re democratizing access to something, it’s a red flag. But in this case, information, it seems, might be the exception. You can see here where they’re trusted by top industry publishers and they put out a lot of data on the cryptocurrency space.
I think this would probably be considered the Bloomberg of crypto. So it’s a platform called GeckoTerminal. It lets you track real-time crypto prices, trading volume, transactions, liquidity data, and the like.
Using that terminal, they published this very interesting factoid about how over 3.6 million cryptocurrencies have died since 2021. You can see the numbers here every year. This blew me away.
Over half of all cryptocurrencies have failed. In the short time that they’ve been in existence, half have failed. So that’s not off to a very good start. So of the 7 million cryptocurrencies listed on GeckoTerminal, 3.7 million have since stopped trading and are considered failed. I haven’t even started talking about the dangers of crypto yet and we’re already off to a really bad start. And the side note here, they say, only pump.fun tokens which have graduated were included in the study. So I just had to ask, what’s pump.fun? And I love this interface here. Look at this button. It says, “I’m ready to pump.”
They don’t even hide it anymore. It’s all about pumping and dumping. And this Solana-based platform, so you want to pay attention to that fact that it’s based off of Solana, lets anyone create and trade meme coins. As if that’s a good thing. It says, most users lose money – no kidding – and only 1.3% of the coins created on this platform end up graduating to be included in the population where half fail. You see, that it’s already an absolute mess. And when you look at coins that now dominate the cryptocurrency space, it’s become quite consolidated. So I’ve listed out here seven coins that constitute almost 90% of all crypto market cap which sits at around $3.14 trillion right now.
And we go down the list here. I wanted to quickly point to Tether. This might be one of the most craziest things I’ve ever seen in my career in finance. And I’m not making this stuff up. These are facts. Nothing excuses what I’m about to tell you.
Our problem with Tether
Now Tether is a stablecoin and it’s supposed to be backed by equivalent US dollar amounts. So let’s say around $150 billion. Now like an insurance float, there’s a temptation here to invest that money and realize a return. That’s when you have to be very careful about what you’re investing that money in. And the last time we looked at Tether, they had invested some of that money in commercial paper. And this gentleman here, Lex Greensill, I remember he leaned over the table and he said, “Joe, we’re printing money.”
What he was talking about was commercial paper. Well, Greensill ended up becoming one of the top fintechs globally, I think, in terms of size and it imploded because there were some problems with that commercial paper model that weren’t properly managed. And when I saw that Tether had invested in Chinese commercial paper, I was seriously concerned about that.
And since they’ve dabbled in risky products, it probably makes sense to have somebody audit this $150 billion that’s supposed to be backing all their stablecoins. They have still not had a third party audit their reserve. Sounds incredible. It’s true. How can we be sure that Tether actually holds these amounts that you see here and you have things like precious metals, apparently they have $6 billion in gold bars sitting somewhere, they have Bitcoin, other investments, secured loans – things like that. Somebody ought to audit this.
And they actually were in trouble for – and you could read this, it’s so hard to believe – the Commodity Futures Trading Commission found that Tether held sufficient fiat reserves in its accounts to back USDT, that’s their coin, Tether tokens in circulation for only 27% of the days in a 26-month sample time period from 2016 through 2018.
They were fined for that. So if you have a track record of not backing your coin, why are we supposed to believe that you’re backing it today? And I love this. Recent article, March 2025. It says, stablecoin issuer Tether says audit of reserves is top priority.
How effing long is this going to be a top priority before it actually gets done? You see this piece here. We wrote about why a Bitcoin crash may be imminent. It ended up happening. This was in December of 2021, and a lot of the concerns that we raised there are still valid. And what happened is that Tether moved to El Salvador.
Their decision to relocate, they said, is a commitment to financial innovation and confidence in El Salvador’s burgeoning digital finance landscape. Well, I was there when they debuted Bitcoin in El Salvador. I remember trying to use one of the Bitcoin ATMs and it was an utter disaster. It was laughable. I’m sure it’s probably matured now. But just remember, El Salvador is quite a corrupt place. When you look at the corruptions perceptions index, it really sits there in some good company around places like Papua New Guinea, Egypt, Bolivia, Eswatini, Liberia. So that’s not necessarily a good thing.
The other top cryptocurrencies
But let’s move away from talking about Tether and our concerns around the third largest cryptocurrency out there and look at some of the others. We’ve talked about Ethereum before. You can see this piece we wrote.
We’ve discussed Bitcoin extensively. We’re long Bitcoin. We’ve been long for a while. What we’re left with are three names and we groked those to get a simple explanation of each.
You have XRP. They say think of it like digital cash that you can use to send money across borders. That’s very interesting right because this crossover payment space is a big opportunity. You have Solana, as I said earlier. This is a platform designed for decentralized apps. It has high speed and scalability.
You have BNB. This is a cryptocurrency created by Binance, one of the world’s largest crypto exchanges and it’s mainly used on their platform and people speculate on the price of that. So when we look at how the top crypto coins have changed over time, in the top there, I’ve shown a sample of what they looked like. I think, well, that was before Luna blew up.
You see that it was the sixth largest cryptocoin. You see that now it’s a lot more consolidated. You have Bitcoin accounting for 64% of all crypto market cap than Ethereum, Tether, etc.
Crypto scams
So the entire space has become a lot more concentrated. And there are still signs of fallout. You have this recent announcement here. Founder of Celsius sentenced to 12 years for fraud and market manipulation.
So this gentleman deceived customers about Celsius’s financial stability and rigged the price of Celsius’s crypto token. How hard is it really to do that? Not hard at all. The reason that it’s easy to manipulate these cryptocurrencies because there’s no regulation. We’ll get- we’ll talk a little bit more about that.
He said these risky financial moves involve some $20 billion in customer deposits. And they say here, once pitched as a safe place for investors to earn interest on crypto assets. Are you starting to see a theme here? All this high-interest [ __ ] out there. A lot of it is very suspect. And when you look at this report from Chainalysis on crypto scam revenue by subclass, there’s so many scams in crypto that you have to segregate them and create subclasses for them.
You have high-yield investment trading accounting for somewhere around half of all crypto scams. I like this Chainanalysis 2025 crypto crime report. Title says it all: The Rising Role of Cryptocurrency and All Forms of Crime.
And they talk about how it’s creating unique opportunities for investigation, I’ll bet. In 2024, cryptocurrency scams, they say, received at least $10 billion onchain. They estimate that to be up where around $12.5 billion.
The crypto trilemma
When we refer to this space as “crapto,” we have every reason to do that. And while there is some “there, there”, a great deal of money has been lost in scams to cryptocurrency. And the reason for that is because of the crypto trilemma.
This is a very interesting thing to discuss. You have decentralization scalability and security. You can only have two of those. You can pause this and read those for yourselves and see that you optimize two and the other falls. So you can only optimize two of these at a time and that poses a real problem for cryptocurrency.
Now people who’ve had their asses handed to them, and that’s the majority of people dabbling in crypto, they don’t like to talk about that. So you’re only going to hear from all the degens out there, half who are blowing smoke up your ass, about how much money they’ve made in crypto.
You haven’t missed a damn thing. If you want to start getting exposure, you’re not too late at all. That’s because now we’re starting to see signs of institutional participation. We’re starting to see some maturity, which is a good thing. Now the biggest problem with crypto I haven’t even talked about. So DeGens are people who invest in stocks, not companies.
Investors invest in companies and companies are valued using any number of methods. And what you’re basically doing is finding the intrinsic value of cash-generating machines, all right? This gives the stock market some structure. In crypto, you have none of this. Instead, there are new methods of determining intrinsic value and a lot of those are based on greater fool theory, which, in the case of crypto, actually involves fools.
Institutional adoption of crypto
Which is why you need to follow what institutions do. We’re starting to see more institutional participation outside of just Bitcoin ETFs, which we’ve covered, and you’ll have a mixture of Bitcoin and Ethereum in a single ETF. Well, now you’re having these multicurrency crypto ETFs. So they might contain the top 10 cryptocurrencies by market cap. For example, so this one by Bitwise. It could become one of the first US ETFs to offer diversified crypto exposure on a major exchange.
That’s where we’re going. That’s where we see this going. That’s where you might be able to invest in crypto as an asset class with some level of comfort that these assets have been vetted, and I use the term assets quite loosely. Crypto as an asset class is starting to emerge, all right. We don’t have a lot of historical data to include crypto in an asset class correlation matrix. If you don’t know what I’m talking about, we recently did a piece looking at how not to go broke and it talks about the importance of asset class diversification.
There’s no breadth available in crypto ETFs, as I said, yet, but we’re getting there. And Bitcoin has shown mixed results on both volatility and correlation to other coins. So correlations within the crypto asset class are quite strong, it appears. But we want to see reduced volatility. The volatility has just been – you could read up on this stuff – absolutely nuts in the crypto world, which makes it very difficult to be a buy-and-hold investor.
We hold Bitcoin as an alternative asset with a cost basis of around $7,000. Now this is house money because we recouped our initial investment and it’s about 2% of AUM right now. It’s a return of about $1,370%. We followed the lead of institutional investors that started to show Bitcoin had some promise. That’s when we decided to dip our toes in the water. So we’ll use that methodology going forward.
Now this is something that I’m leaning towards more and more believing. That the institutional opportunity for crypto first hasn’t been realized at all. It’s just dipping its toes in the water. But, also, that is the real opportunity to be had in the crypto space. In other words, what you’ve seen so far is largely a lot of people losing money and going forward. We’re actually going to see the real opportunity to be had. So to all the Kool-Aid drinkers, nobody cares that you made a cajillion% on poopoo coin.
If you truly cared about creating wealth, you would welcome this sort of constructive criticism. Leave your allegiance at the door and engage in a constructive manner so that we can all learn something.
So I’m going to go ahead and leave you this interesting presentation we did recently on asset classes. It relates to this. It’s about how not to go broke. You ought to give that a watch next. Thanks so much for taking the time to watch this today.
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