Traveling from Paris to Geneva can be quite instructive. First, one discovers that there are several first classes — the most expensive one offering a tepid “champagne” flute. Then, ears to the ground or not, you lose all illusion about the supposed cunning of the wealthy: in TGV first class, tax dodgers speak loudly (because of their age? Not only…). I am sitting next to a Swiss trader who, seeing me immersed in an art magazine, bawls without suspicion into his XS.

SHORT STORY

His interlocutor’s having a hard time: it is precisely because “cryptos” are up (a little), idiot, that we must sell. Slowly. In small batches, without scaring the sucker. He ends up hanging up, we introduce ourselves — I’m sorry for having heard, I’m lost when it comes to Bitcoin, etc. Eric is happy to explain life on Mars to me. According to him, crypto-currencies are a boon for seasoned traders — but only if you short them.

TO SHORT. You sell a plummeting asset today and deliver it later, buying it cheaper in the interval. It is thus possible to make fortunes when markets collapse.

“In the long run, cryptos tend to zero: there is nothing behind. No factories, no patents, no brands, no revenues, nothing…” I therefore candidly ask why he’s so interested in this shallow market — and get a carnivorous smile: cryptos collect savings all around the world. Geeks believe in it, Thai and Brazilian small investors too: they buy, prices soar, traders short. “It’s the law of finance, grins Eric: it’s a zero-sum game. Unlike in the real economy, to win, you have to make others lose.”

SMALL FISHES AND…

Eric goes on: there are two important things to know about the cryptos market. First and most factual: it is a tiny market whose actual size is incommensurate with its media success. The first three cryptos (BTC, XRP, ETH), the only significant ones, weigh way less than Instagram’s estimated valuation, i.e. $ 100 billion.

Secondly, and more disturbing: “People have no idea what they are buying !” XRP? Totally controlled by a guru. ETH? “Scamland…” BTC? “More than 80% of Bitcoins are held by Russian farms, Chinese close to power and founders … dead or alive.” Definitely not a market of whales but one of Leviathans, who decide how much and when they’ll rip off dreamers.

WHALES. In the financial jargon, whales are massive holders of an asset: their moves (buy/sale) cause invincible swirls.

I then pretend to remember having heard that the Ethereum network, with its smarts contracts, opened unprecedented horizons for users. Wrong, again. “It’s slow, a thousand times too slow, only good for ICO scams and like Bitcoin it needs too much energy. Unsustainable.”

TITANS, ONCE MORE?

I opine with admiration. So the entire blockchain economy, starting with the cryptos, is doomed? “Yes and no…”, Eric slips. No, because there will always be lot of nitwits to believe in the crypto-currencies miracle (and traders to leave them high and dry). Yes, because blockchain technology is genetically faulty.

As I remain silent, he gives me a charitable update: “Blockchains — yes, there are dozens and not only one as the morons think — are the slightly improved descendants of P2P. Napster, remember? We store and share digital goods on personal computers, away from companies and states. But for this to work on the scale promised by the blockchain so-called revolution, he adds, two conditions are needed: a single global network and a titanic infrastructure. Ethereum or EOS will never succeed to do so, not to mention those mushrooming startups.” So, what is to be done? “There is only one solution, and it is the one that will prevail — but unfortunately it won’t allow any kind of speculation…”

We enter Cornavin station: “Only a Titan, even hated, will inspire billions of potential users the necessary confidence and will provide the required power: Google or Amazon.”

Eric firmly believes that today’s giants will be soon offering the blockchain of tomorrow for free (for users as well as for devs) — as they already do for Cloud services. “Killing the dream, huh? Not my problem. Nobody sees that coming, we do. So we short but we invest nothing in blockchains businesses: they will be swept away. All of them.”

In Geneva, the weather is chilling.

David J. Martin
Twitter | @godavidmartin
(http://linkedin.com/in/godavidmartin)