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  • 👀 The 2021 bull market was a GIANT ponzi scheme

👀 The 2021 bull market was a GIANT ponzi scheme

Is all hope lost?

Author

Aakash Athawasya
November 25, 2022

GM, this is the doodhwala. That nice friend who’ll tell you there’s a cop up the street so please wear your helmet and seatbelt. We don’t want you to get caught 😇

Speaking of safety, you better strap on your seatbelts for this one.

We’ve got a wild one for you this Saturday. 🎢

All Crypto Bull Markets Are Ponzi Schemes.

Last year, a few things were different.

  • Sam-Bankman was considered a crypto genius.

  • Everybody was watching Squid Game.

  • That one person was still using Microsoft Internet Explorer.

RIP Internet Explorer. 🪦

But more importantly, crypto prices were 🚀 this was exactly a year ago:

  • Bitcoin: $59,000

  • ETH: $4,500

  • SOL: $210

What if I told you — the 2021 bull run was one BIG GIANT PONZI scheme?!

That’s what our good frens at the Bankless pod 👋 talked about, and we listened to the whole 110-minute discussion. And made notes!

Here’s the TLDR theory:

⬇️ Governments print a boatload of money and make loans cheaper

⬇️ Big institutions take this money and lend to small institutions

⬇️ Small institutions lend money to crypto hedge funds

⬇️ Crypto hedge funds YOLO into shitcoins

⬇️ Shitcoins are put in 100% APY pools

⬇️ Retail buys shitcoins

⬇️ Retail gets REKT

This was the basis for everything.

Everything from — LUNA going down the 🚽 — 3AC going 💣 — lending companies (Celsius, BlockFi, Vauld, Voyager) stopping withdrawals ❌ — Sam going from a curly god to the most hated man in crypto 🤬 — to you 🫵 losing your money.

And most importantly for crypto prices going from 🚀 to 💩

How did this happen?

Now that you’re done with the TLDR (too long didn’t read 😒) let’s do the TIWM (too interesting want more 🤤)

The 4 HOUSES of the apocalypse

In order to understand this great unraveling, we gotta break this up into four houses (kinda like you had when you were in school, but with cooler names!)

  • The House of Powell

  • The House of Barry

  • The House of the 3 Arrows

  • The House of Kwon

Let’s get into it.

The House of Powell

This is Jerome:

Jerome “money printer go BRR” Powell to be precise.

He is the chair of the Federal Reserve aka the most powerful banker in the world

Jerome got everyone’s hopes up in 2020 when Covid-19 was going crazy like Christmas songs this time of year.

So, he gave everyone free money in the form of cheap loans, and cash airdrops (seriously check this!).

This made crypto investors take out big (and cheap) loans to bet on:

  • Bitcoin

  • ETH

  • A bunch of shitcoins

2 years after he gave everyone free money, he said “You know what, imma just take back all the money I gave to ya’ll to spend and overleverage, lol #SorryNotSorry”

And then he began raising interest rates.

The House of Barry

This is Barry:

Barry “I buy the top” Silbert to be precise.

He is:

  • CEO of the Digital Currency Group (owns Genesis, Grayscale, CoinDesk)

  • Worth $2 billion

  • Bitcoin OG (since 2013 prolly)

Barry put out this tweet in June 2021, right after Bitcoin crashed from $63k → $33k

He warned that borrowers are ⛓ chained ⛓ with lenders. Kinda like the toy is chained with the Happy Meal, can’t get it without paying for the burger, fries, and coke. 🍔 🍟 🥤

And his companies - Genesis and Grayscale were at the top of this chain.

The House of the 3 Arrows

These are the bois from 3 Arrows Capital:

Su “I take your money” Zhu and Kyle “I go on CNBC after taking your money” Davies.

They’re the largest crypto hedge fund in the world.

They made big bets in 2020 when the house of Powell was printing money outta thin air.

Their biggest bet?

Taking a 6% stake in the Grayscale Bitcoin Trust, which is like a fancy way of saying “a contract that tracks which price of Bitcoin that only rich people can buy.”

Once they started making money on this bet, they began playing 2 games:

  • The alt-L1 game: Betting on alternate layer-1 blockchains like Avalanche, Luna, etc.

  • The DeFi game: Betting on niche DeFi coins to bring back DeFi summer of 2020

When did they start these games?

In September 2021.

Two months later, crypto markets topped and 3 Arrows Capital missed its mark.

The House of Kwon

This is Do:

Do “steady lads” Kwon to be precise.

He is:

  • creator of LUNA and UST

  • the one who’s “size is not size”

  • who’s running from the police but is on every podcast

His coins — LUNA and UST — were one of the biggest bets made by crypto hedge funds (like 3 Arrows and Alameda).

And when he fell, he took down a bunch of things with him like the price of BTC and AVAX (which were part of the LFG) but also lenders like:

💀 Celsius💀 Voyager💀 Vauld💀 BlockFi

…which directly or indirectly held LUNA and UST and had funds on Terra’s Anchor Protocol to provide yield to their investors.

Who were their investors?

PEOPLE LIKE ME. PEOPLE LIKE YOU. PEOPLE LIKE US!

This was when the first domino fell. 🫢

The House of Cards crumble

When the House of Powell began raising interest rates in February 2022, people pulled money out of risky crypto bets.

The first bet they pulled money outta?

LUNA.

HOUSE OF DO FALLS 💥

When LUNA blew up in May 2022, it was like someone let out a big 💨

And it smelled bad. 🤢

Everyone was pointing fingers at each other. And no one was owning up to the stench.

One month later, they didn’t have to.

because…🥁…

HOUSE OF 3 ARROWS FALLS 💥

The hedge fund that bet big on LUNA (and UST) with 🚨 leverage 🚨 didn’t pass the smell test.

In June 2022, 3 Arrows Capital announced it going into liquidation which is a nice way of saying, “we screwed up so pls help us.”

This led to a bunch of companies they borrowed from going down as well.

Companies like:

  • Celsius

  • Voyager

  • Genesis ⭐️

and so…🥁…

HOUSE OF BARRY FALLS 💥

The neighbor of the House of 3 Arrows Capital was — Alameda Research.

Alameda went down with 3 Arrows, but it was propped up thanks to FTT tokens provided by the league of legends’ wizard Sam Bankman-Fried.

But we all know how that turned out. 🤡

Notice the ⭐️ on Genesis ☝️?

Genesis is the biggest crypto lender in the world, they’re like the FIFA World Cup of lenders.

When 3 Arrows went down, Genesis was hurt bad.

But when FTX 🤝 Alameda went down, Genesis was hurt real bad!!

So, just to recap 👇

The House of Powell pushed the first domino (by increasing interest rates) and this is what happened:

House of Powell 🤜 House of Kwon 🤜 House of 3 Arrows 🤜 House of Barry

Wait, where am I?

You and me, my friend, are left hodling the bag 👝

Except it’s not the 💰 it’s the 💩

Many of us got screwed because we either:

  • bought worthless shitcoins which were dumped by the HOUSES

  • locked money in CeFi platforms which were bank run by the HOUSES

So, was it all a ponzi scheme?

Every single win of the 2021 bull market:

  • Bitcoin at $69k

  • ETH at $4.8k

  • Record NFT sales

  • SOL-LUNA-AVAX

  • DeFi coins pumpin

Was everything just a Ponzi scheme created by the Houses of cards?

If 2017 was the ICO mania, was 2021 the risk mania?

We really don’t know. 🤷‍♂️

We’re just a humble doodhwala. 🍼

But this is something we’ll be thinking about for a long LONG time.

What do you think? Was 2021 just a Ponzi scheme?

📢 Huddle UP, my fellow crypto bros!

Wanna hang out with the coolest web3 folks in town?

Then join your friendly neighborhood doodhwalas🥛for #FILBangalore 🚀

Here’s the super exciting lineup for this event and it’ll surely keep you on your toes:

And so many more along with some great workshops and tracks for you to take part in and BUIDL ON!

Damn. That’s more star power than the whole cast of Dhoom 🤯

So register here for #FILBangalore and come out to Sheraton Grand in Whitefield, Bangalore on November 29th & 30th! 🥛

Click on the banner to register and LFG 🔥🔥🔥

Milky Meme Of The Day

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That’s all for today bhaiyo aur bheno! Naale Sigona!

Yo! Our legal and financial advisors (aka our good ol’ conscience) have asked us to add this boring disclaimer.

None of what you read here is financial advice. We aren’t here to get you to buy or sell a crypto. We’re only here to tell you what’s up in crypto today and make you laugh. So, if you screwed up on a trade, that’s on you G. Stay safe in the markets.