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Do Free Markets Lead To Greed - Issue 58

Do our current perceived free market conditions encourage it?

If you have been floating around the Crypto industry for any length of time, then you know that it is the closest thing to a free market we have. I find this incredibly fascinating and we get to see a glimpse of free market economics. There are positives and negatives to this, however, the point I want to make today is about how this encourages survival of the fittest, if you like. There are other things that add to this mentality from within our industry as well as from outside.

The River Tor with Barnstaple in the background at dusk. The end of an evening exploration of North Devon countryside.

Some questions beginning with W. Why do I want to talk about this? Why is it important? What is a free market? Will this always be relevant? What are the outcomes? Maybe I answer some more w questions, maybe I don't answer those coherently, as ever this blog will have some of my answers and thoughts. It is a big topic because it impacts everything we do if we want to sell or be seen.

Lets start with why I want to talk about this. Numbers and people have always interested me, I just didn't know quite how much when I was younger. I studied business studies and economics between 16-18 years old, but I was having too much fun away from studies to understand how passionate I was about these subjects. Economics to me is how and where people and numbers mix.

Economic markets are essentially anything that involves, raw materials, manufacturing, products, services, money or people. Those markets can be anything from something specific like brick production to something all encompassing like banking. Markets are regulated by governments, some of them regulate with a heavier hand than others. Some regulation is vitally important to protect consumers health and rights. There are problems with regulation too, for example the who makes political donations and why, lobbying being a key word.

What's a free market? And do free markets exist? A free market is a market dictated entirely by supply and demand with no government control. Do they exist? Maybe criminal or black markets are the closest thing we had before we had The Crypto/Web 3 markets. A good question to ask is how free are Crypto/Web 3 Markets? While there are regulations, people treat this market like a completely free market and we see that in the patterns of behaviours as well as individual behaviours.

Free, or open markets, lead to private individuals or companies controlling trade and industry. I am not trying to debate the merits or problems of living in a capitalist society, but one thing I don't see is it changing until we can drastically reduce the cost of energy or production. A 2% growth model has been so key to everything achieved politically and economically in the last 80 years that it is institutionalised. And from my perspective, the fractionalising of banking has only solidified that principle.

Why is this important? Because it drives societal behaviours and standards. How we interact and what we purchase defines what businesses succeed and fail, with the exception of core societal utilities, which are things our taxes mostly entitle us to, or are seen as basic requirements of living by our governments. And this brings us back round to supply and demand. It's an incredibly intricate relationship but also simplistic at the same time.

Very orange swag from Feather Frogs, brought back from NFT NYC by Jojo.

In summary, prices go up when demand is more than supply and prices go down if supply is more than demand. Demand is the want for a good, product or service. Supply is the amount of a good, product or service available for purchase. If there is no demand then the good, product or service is at the end of it's life cycle, unless it is propped up by something. Think major banks in the UK after the 2008 mess that the globe is still kicking down the road.

For all that free markets can be seen as a leveller (anyone can play), they are open to incredible amounts of manipulation as well as being heavily impacted by 'market makers'. Especially if people can leverage your liquidity with bets on either side of the line and all of those bets are visible. And we see this happen with the regular liquidations in the Crypto market. e.g. people who have shorted BTC and leveraged 10 times their portfolio, then BTC goes long. You can easily find liquidation stats and numbers if you want to go looking.

What's to stop someone making their figures look better by making deals with their friends/partners. If you conform to this style, we will make sure you get seen or I'll buy yours if you buy mine kind or thing. Maybe purchasing their own products in an effort to make it look like there is a high level of volume, or demand. Just a few places the line can get blurry and where we don't have answers yet.

A screenshot showing the total Crypto liquidations in the last 24 hours - $126,450,000. Screenshot taken at 00:13 BST 19/08/2023. From Coinglass.

Will this always be relevant? I don't know is the answer but I think it will be relevant for as long as there is money in society. And for as long as we want goods, products or services we will need to find a way to make the value proposition worthwhile for all involved parties. I think there are only Three possible things that move us away from money in my lifetime and both of them will be a huge shock to the systems of society as we know it.

AI and robotics. If AI can complete all cognitive tasks to a level that is above that of a human, robotics has the dexterity to complete all physical tasks better than a human and the two are compatible with each other. At that point humans will not need to produce any goods, products or services. They can all be done by AI. At that point we will need a Universal Basic Income to buy perishable goods, or money won't be a requirement.

Energy production costs drastically reducing. If we don't have to pay for energy, including transportation, then everything is vastly cheaper (possibly incomprehensibly cheaper). What are the potential solutions? Nuclear fission, not fusion (although fusion is useful and a possible short-medium term solution). Fixing the nitrogen storage problem, it's got insane amount of energy in the right circumstances. Or geo-thermal. If we can dig deep enough. None of these are likely tomorrow and even with breakthroughs there is no telling if they are attainable and sustainable.

A cataclysmic event that takes us back to an age of self sufficiency. It could be a solar flare that wipes all tech, I assume that is possible, I believe I saw a video of Neil deGrasse Tyson talking about it! Or asteroids etc. An event that would not be fun to live through, by any stretch of the imagination. We have become very acclimatised to the comforts and conveniences we have created for ourselves.

What are the outcomes? We will end up with tighter and more specific regulations in the Crypto/Web 3 industry for much of the globe. Hopefully these regulations encourage innovation, use of the tech and highlight the importance of end user ownership but I believe that will have to come from those that understand it, not those that potentially want to stop it.

Greed. Greed is definitely an outcome. Competition is also an outcome. Greed and competition together leads to bad things for this market. We see this repeatedly in existing financial markets (and outside of them too, if there is money to be made, there is often greed hanging around somewhere) and we have seen it more than once in this market. Just FTX. It is all anyone needs to say, and that is only the tip of the iceberg.

If you don't want to see behaviours like this played out over and over again, then take the time and effort to support the people you see acting differently. There are thousands of people telling you they aren't like that but a lot of those people show behaviours that say otherwise. Is it all doom and gloom? No. Not at all. This blog isn't about that and I don't want you leaving this thinking that.

The opportunity exists for us to make this the place where true equality of opportunity can exist and be protected and reinforced by the technology it uses. There are billions of use cases for blockchain technology, at least as many reasons as there are people on the planet. Make it a place for good. Aim to give people the potential to act differently and get rewarded.

Samuel, my friend rabbit chowing down on some hay.

I like numbers, I have always got on well with them. For the most part they make sense, at least until calculus. And I have always been intrigued by people and what they say. Group mentalities and how people lose their individuality is one of the things that fascinates me most about people.

I got to the end and realised I have more to say. Maybe I remember, maybe I don't. You will just have to come back next week! Thank you for giving me some of your time, I hope you found this blog insightful, if not interesting, and I will be back next week, until then. Take care.