9/18 ANDY HOFFMAN (CryptoGoldCentral.com): Why Ethereum is Such a Dangerous Investment
Through decades of training and expertise, I have built a career, and investment portfolio, understanding and communicating the “layman’s perspective” of complex technologies. To wit, as an officer, analyst, and consultant, my I have learned how to “know enough” about complex technologies to understand whether they are good investments. It started with my role as a generalist at a NYC hedge fund in the late 1990s – followed by a decade in oilfield equipment, services, and drilling; six years in mining; six years in bullion sales and storage; and the year I’ve spent operating CGC.
In the latter case, I started analyzing cryptocurrency around the time I purchased my first Bitcoin in late 2013. Since investing heavily in early 2016, and going all-in last summer, I like to think I’ve become as knowledgeable about the space, from a financial perspective, as anyone. Which is probably why I’ve been able to make a living crypto consulting; operating a crypto-focused blog; building a 14,000-person Twitter following; and becoming an on-air personality on the World Crypto Network. No, I’m not saying this to “toot my horn” – but demonstrate that for a technological layman, I’ve learned a lot about what makes cryptocurrency tick.
That said, I know NOTHING about the underlying technology. However, I’ve learned enough about Bitcoin to be 100% confident that it works – and that it will not only work better in time, but has essentially no flaws. To that end, it took five years to understand this…including two before I made a heavy investment, and three-and-a-half before going all-in. This, and ten years of the Bitcoin network running non-stop - fighting off countless, myriad threats along the way.
Conversely, Ethereum has only been around three years – and didn’t last one, before a horrifying hack caused its founders to “roll back” the blockchain with a hard fork that permanently destroyed its immutability…in the process, creating a competing chain, Ethereum Classic. To that end, Ethereum didn’t first become valuable until the spring of last year, when the ill-fated ICO craze put it on the map – not as the “World Computer” Vitalik aimed it to be, but an incubator of pump-and-dump scams.
As described last week, in an article where I thoroughly detail Ethereum’s history, the ICO bubble burst barely two months after inflating – and likely, would have destroyed Ethereum’s reputation, and value, permanently if it weren’t “bailed out” by Bitcoin’s price explosion in the summer and Fall, following its victory in the “scaling debate.” After which, hundreds of new altcoins were created to piggyback on Bitcoin’s success; naturally, using the most “user-friendly” altcoin creation platform available…Ethereum.
Subsequently, Ethereum’s price exploded – for reasons completely different for what it was created to do…i.e., serve as a cryptocurrency “smart contract” platform. Which was only fueled further by clueless investors SPINNING Ethereum’s success in a manner that would justify its valuation, by PRETENDING to understand how it works. This, as its “officers” proposed hare-brained schemes like shifting to proof-of-stake – proving, yet again, that unlike Bitcoin, Ethereum is highly centralized. Less so now, given how large its network has become – but centralized enough that Vitalik can still effect significant change.
As I have written numerous times before, the reason Main Street and Wall Street embraced Ethereum so strongly were 1) it was the only crypto, aside from Bitcoin, with significant size and liquidity; and 2) it was “socially acceptable” to champion – as unlike Bitcoin, it could simply be considered a “next generation tech stock,” as opposed to a disruptive monetary protocol threatening the status quo.
Hence, Ethereum continued to grow in power and prestige, despite the fact no one actually USED it for anything, other than creating new altcoins. To that end, with altcoins in a vicious bear market; and ICOs dead; Ethereum has been rendered all but useless - at a time when numerous competitors have emerged; and oh yeah, through RSK, Bitcoin, too, has smart contract capability. To that end, I started warning of the potentially calamitous issues Ethereum faced way back in mid-February (and BCash, too!)…
…and if you don’t believe ME, listen to what crypto technology expert Jack Mallers had to say about Ethereum at the same time…
Yes, it was pretty clear Ethereum was a disaster waiting to happen – that unquestionably, would lead to the dramatically lower valuation against Bitcoin that has since materialized…and potentially, a much lower ABSOLUTE valuation if the altcoin bear market doesn’t end soon. As while it’s too early to suggest Ethereum is an “Emperor with no clothes,” the facts remain that “smart contracts” are not yet used, and MANY cryptocurrencies will offer this capability, including Bitcoin.
So, when I Tweet that Bitcoin is immune to ALL FUD - given its explosive network growth, and inexorably growing use case; keep in mind, this does NOT refer to Ethereum, too. To the contrary, the “operational” headwinds ETH faces are larger now than ever; like BCash, and countless other altcoins, needing a major Bitcoin price explosion to “lift all boats”…and at least temporarily, bail them out.
https://twitter.com/Andy_Hoffman_CG/status/1041726942431535104
https://twitter.com/Andy_Hoffman_CG/status/1041998488551055362
Nice work Andy. One of the biggest problems in the crypto space is the lack of education that most people have about the technology. The fact that these crazy volatile markets do not necessarily reflect fundamental value. People like you and me just need to keep screaming “ The chickens will come home to roost!” And unlike the endless manipulation that can occur in the precious metals and fiat markets, in crypto, these technical problems in shitcoins like ethereum, will force the chickens to roost.