Hey everyone me kevin here, the economist released a really awesome paper on what about the possibility or what would it take for cryptocurrencies as a whole to go to zero and in this video i'll also talk about what i sold and what i bought when it comes To cryptocurrencies, let's get right into it and remember my coupon code on building your wealth does expire tonight. Price goes up tomorrow morning. All right folks take a look at this right here. So this is the economist.

I highly respect this magazine. They do a great job and take a look at the middle of this article. We're just going to look at some of the fun parts here. First, they talk about what could happen if cryptocurrencies evaporated, because when we go to that extreme, then we can kind of see the contagion that it would cause and then potentially work backwards and evaluate.

Is that even likely to happen? Because it shows us how intertwined cryptocurrencies are already at how they've become and are becoming more intertwined. So take a look at this. The total value erased if cryptocurrencies went to zero is not just the value of the cryptocurrencies, but also the value of crypto firms and exchanges. Think binance, coinbase or other companies that have massive market values outside of crypto market values, but on our stock exchanges right, but also think about other companies like square paypal, revolut visa.

As the economist says, they would lose chunks of growing juicy business revenues which would dent their valuations, and some companies would just go utterly bankrupt, obviously think about hud-8 mining, for example. As a smaller canadian miner right, the contagion would be pretty bad if cryptocurrencies went to zero, because so many companies are involved now, including even to some degree tesla who invests in bitcoin. But let's take a look at this others, oh also check into the chat. Take a look at this others that have also ridden the crypto boom, nvidia think about those graphic cards to mine, ethereum uh or the asic chip makers, who are uh using asics to mine bitcoin.

But anyway, contagion could spread through several channels to other assets, both crypto and mainstream, and so they give three channels to which a crash could happen. And then they talk about sort of the likelihood which i'll talk about as well. And i found the three channels really interesting: we won't go super deep, i'm not going to read you all of this word for word. We'll give you a little bit of a summary here.

So channel number one is leverage. The economist believes that ninety percent of money invested in bitcoin is spent on derivative like uh derivative products like swaps or basically bets on future price fluctuations. That's because estimates show that about 70 of cryptocurrency trading right now is done by institutions who have access to a lot of different derivative products that we don't have options or access to. One really common type would, of course, be an option contract right, a call or a put, in other words, a way to make it directionally, bullish or directionally short bet.

Bearish bet. Now they also mentioned here in the economist that most of these trades happen on unregulated exchanges, where customers can essentially borrow and borrow more and more money on top of borrowed money. Essentially, and this can trigger big margin, calls which honestly that's some of my favorite. Those are my favorite moments to invest in crypto, because then, when i see crypto prices go down, i know it's not because of the crypto itself.

It's because of the overall broader market, that's suffering pain. People are getting liquidated because they took out too much leverage. Hopefully, it's just the suits like citadel or whoever's. Investing uh and retail are buying the dip, hopefully, but anyway, uh now, margin calls in crypto currencies can get exacerbated by leverage, and they mention here that it's hard to tell exactly how much a leverage there is, because there isn't as much transparency in the cryptocurrency market And i understand there are some weird guys's in the uh typical financial markets as well uh, some weird leverage things that go on that we don't even know about some weird arcane products, certainly ones that have led to the 2008 great recession.

The cryptocurrency hasn't done that to us yet, but then beyond debt and uh margin essentially and margin calls they mention that stablecoin fud again right. The potential that stablecoins break the buck aren't actually worth a dollar and when they're not worth a dollar, people seek to redeem their stable coins, potentially not being aware that, if they're signing up for interest on their stable coins, they've now lent that money out and those Stable coins could be lent out 10 20 different times, and you could potentially see a la collapse in confidence or the breaking of the buck of stable coins and then ultimately selling of crypto, and then, if crypto is sold off because, let's say tether falls apart. You know the good old tether fight, then, all of a sudden, you get those margin, calls and you have these two channels compounding on each other uh, and so that gives you kind of just a brief summary of that and then, of course, there is another potential. Uh reason for a sale, and that is what they call a cryptocalypse, which is kind of like an apocalypse like the end of sentiment around crypto.

So the economist is saying, like look. You'd have massive contagion outside the cryptocurrency world. If crypto went to zero, you'd also have uh three channels to get there. One is leverage, two is stable coins but then also a loss of sentiment, and this is where a lot of folks who question cryptocurrency say: hey.

The only thing that actually props up the value of cryptos is is potentially sentiment. That's what some people argue right. Uh they're, like where's the, where are the earnings right, where's, the fundamental and and this is where obviously crypto fans encounter generally back with store value or utility of some sort or purpose of some sort right. But they make this interesting argument here that one of the reasons people are so into crypto is potentially because of low interest rates leading to lower yields in the market.

Leading people to go towards more exotic assets. Like cryptocurrencies found that kind of an interesting argument, and so this creates the idea that you could have these three channels that actually relate to each other, and so this is where the economist really paints. This potential picture of wait a minute. You have these three channels to see it collapse in cryptocurrency.

If you have a loss of sentiment, you could break the buck on stable coins, and then you could have this leverage. Disaster and cryptocurrency could essentially go to zero as the exotic acid, as they call exotic acid evaporates. Now, to the extent of this actually happens, they don't give an opinion, but i will what i think is because of the vested interests by so many companies, both publicly traded off market defy institutional investors, non-institutional investors, retail. I do not see cryptocurrency going to zero, but i do see cryptocurrency as a trading opportunity in some cases and in other cases i see it as a huddle opportunity and now what about what you see regarding me selling my crypto? Yes, i did sell my crypto, but i have bought it back.

I sold my crypto as a trade during the peak fud of the evergrand crisis i sold and then i re-bought i'm bullish on crypto in 2022, but i want to be fair about my expectations. I do think that if we do get inflection points to the downside and cpi inflation, which i think way understates inflation anyway uh, then then it is possible. We could see some sideways trading on cryptocurrencies, at least until we get out of all this china fud and all this nonsense garbage which, in my opinion, is barely worth covering uh. It's it's so redundant at this point.

Whatever china see later, we'll do crypto without you and i think 2022 is the beginning of where we go more mainstream with cryptocurrency. So i'm personally very excited - and i wanted to share this if crypto goes to zero story with you, because i thought it was kind of interesting, the three channels they gave and i don't believe they're likely, but they are right. Those three things do heavily affect at least the prices that we see in the fluctuations in the cryptocurrency market so anyway, folks, thank you so much for watching this video and folks we'll see in the next one bye.