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Much of modern finance was illegal 50 years ago. The first financial future was traded on May 16, 1972. Before that, futures were confined to agricultural commodities, where they were used mostly by farmers and buyers of agricultural products. The first junk bond was sold in 1986, and it achieved the largest percentage gain on the NYSE, then in 1987 suffered the largest percentage loss. Until 1999, banks and brokerage houses were totally separate. Half a century ago, such activities were viewed as gambling. There were still people around who remembered 1929 and the Great Depression. Finance used to be a support function for industry. Now, in the US, industry is almost a support function for finance - just something to generate numbers to bet on, like horse racing. Cryptocurrencies are the ultimate extension of this trend. They're totally detached from any physical reality, or even economic reality. NFTs are worse. Most are overpriced pet rocks. It's worth noting that China does not work this way. China's government has kept finance in its box, focusing investment on actually making real stuff. That seems to be working out. The US has lost the capability of making consumer electronics and telecom gear. US Steel, once the biggest steelmaker, is now in 35th place. This may end with the US a has-been country, like Britain, pining for the glory days of empire. How does this unwind? Well, the bottom has fallen out of Axie Infinity, once the biggest NFT. It's really hard to tell the value of NFTs on OpenSea, because there's so much wash trading and not much liquidity.
But it seems to be difficult for a purchaser to sell an NFT at a profit. Profits mostly flow to minters.
As I point out now and then, NFTs as investments work a lot like Beanie Babies on eBay - high asking prices, low actual selling prices, large numbers of items on sale with high reserves and no bids. That's what an illiquid market looks like. ICOs were a big thing back in 2018. Then the SEC started cracking down. Now there are few ICOs, and the SEC is working through the backlog, bringing the hammer down on about two ICO promoters per month. In the aftermath, not only were most ICOs failures [1], it's hard to find any that created a business outside cryptocurrency speculation. There's much tail-chasing in the cryptocurrency world. Historically, that doesn't end well. [1] https://www.investopedia.com/tech/most-successful-icos-all-t... |
"China's government has kept finance in its box, focusing investment on actually making real stuff."
What's happening with Evergrande is the opposite of keeping finance in its box. Evergrande borrowed money from banks and took money from consumers before building a condo. They then took the money and "invested" in things like football players and stadiums.[1] Consumers are left without homes. [2]
[0] https://www.statista.com/statistics/248006/real-value-added-...
[1] https://en.wikipedia.org/wiki/Evergrande_Group#Sports
[2] https://www.france24.com/en/live-news/20210914-evergrande-dr...