Black Swan Author Reveals The Real Reason Behind Catastrophic Crypto Crisis

Nassim Taleb – an award-winning philosopher – has called out the cryptocurrency market again following the FTX implosion. The famous author thinks Bitcoin is a tumor and can soon present investors with an unprecedented deleveraging scenario.

Moreover, Taleb has indicated no significant cash flow in the cryptocurrency market. As such, the former options trader and risk analyst thinks the crypto market is in a liquidity crisis.

Notably, a liquidity crisis is described as a financial situation characterized by a lack of cash at hand across many financial institutions simultaneously.

Furthermore, most crypto companies – including Binance exchange – use their native tokens for insurance funds. The trend has been questioned as irrational since most crypto projects either pre-mined their tokens or control the largest hash power.

Through a series of tweets, Taleb indicated that blockchain technology has not flourished to generate significant cash flow, particularly during bear markets. Instead, Taleb thinks that the cash circulating in the cryptocurrency industry is from other crypto projects.

2) The point is that the blockchain, in spite of all the hype, has not managed to produce anything directly useful to produce cash flow. The income is circular, from crypto-to-crypto, with some suckers in between.
— Nassim Nicholas Taleb (@nntaleb) November 24, 2022

The decline in crypto cash flow can be attributed mainly to the FTX fallout and the DCG’s impending implosion. Furthermore, millions of crypto traders and investors were stranded by the FTX collapse, with the investigations taking slower than anticipated.

Closer Look at Crypto Market Outlook

According to the latest crypto price oracles, the total cryptocurrency market capitalization stands at around $868 billion. Additionally, the total reported crypto trading volume in the past 24 hours stands at approximately $44.7 billion. The huge difference indicates that most crypto assets are used for speculative purposes and have been stored for later use.

As such, most cryptocurrency community continues to disregard Taleb’s opinions. Furthermore, speculation is part of the grey area that the cryptocurrency market thrives on.

One of Taleb’s opinion comments argues that the Bitcoin market should be compared to the Gold and oil industry that all have different intrinsic values. Moreover, the Bitcoin industry has significantly opened up locked-up economies.

Does gold have cash flow? Or oil? It seems utility of the asset should be considered.
Granted, most cryptos are useless ponzis, but they aren’t inherently useless/without value.
If they make the storing or transfer of money (especially in the 3rd world) easier, they have value.
— THE INVESTOR’S GATE (@Investors_Gate) November 25, 2022

According to tech billionaire Elon Musk, Bitcoin will thrive long-term, but the ongoing bear market will last long. The reduced cash flow highlighted by Taleb is a culmination of the past major on-chain activities. Furthermore, global confidence in the cryptocurrency market has significantly been shaken.

Nonetheless, every cryptocurrency trader must conduct proper research and form personal opinions before purchasing or investing in the digital asset economy.

Source: https://coinpedia.org/opinion/black-swan-author-reveals-the-real-reason-behind-catastrophic-crypto-crisis/