In this ‘as-long-as-money-stays-cheap-you-win’ and ‘number-go-up’ environment tech and crypto companies were able to raise absurd sums, in a lot of cases without even having a product and just the vague idea of doing something with Web3, NFTs, and so on. VCs had so much money, they didn’t really give a shit.

As Izabella Kaminska wrote in her excellent anaylsis, things are quite similar to when the dotcom bubble started to pop: The Fed started to tighten in May 1999, the dotcom bubble peaked in March 2000.

It’s complicated and no one really knows, even though politicians and their favorite economists tell you so. It’s similar to the crypto industry as a whole: I’m very skeptical about nearly all the crypto assets out there (except bitcoin and the handful of things with an actual use-case, mainly exchange utility tokens).

According to [Kaminska], the phase of experimentation is over, and the “blockchain/crypto/web3 is a solution looking for a problem” narrative will be tested for good. This won’t be pretty.

As Zoltan Pozsar pointed out in his Bretton Woods III thesis, is that we’re entering a new monetary order. The seizing of Russia’s foreign exchange reserves marked a turning point in geopolitics. It showed everyone: Your dollars are only worth something as long as the G7 (and especially the US) say so. China, India, and others took notice.

Bitcoin is risky as well of course, but as Pozsar has pointed out there is a chance that it could come out as a winner out of all this uncertainty.

By the way, Poszar thinks that the Fed will continue with Quantitative Easing in Summer 2023. So maybe our rock JPEGs will moon again by then.