Over the course of the past few months, we’ve watched the entire digital currency market crash as lending platforms go belly up, hedge funds implode, and investors, both large and small, run for the exits.
As the digital currency liquidity crisis deepens, exchanges, lenders, and other players concoct schemes to survive the ‘crypto winter.’ The latest of these is a plan by Polygon-based lending platform Teller Finance to introduce ‘Ape Now Pay Later,’ a credit facility allowing speculators to buy blue-chip (read expensive) NFTs on payments plans.
What is the ‘Ape Now Pay Later’ scheme all about?
Teller Finance is one of many so-called decentralized lending platforms. It lives on Polygon, one of the proposed Ethereum scaling solutions.
Teller CEO Ryan Berkun and his team recently announced that investors could buy blue-chip NFTs in installments through the platform. For a downpayment, which could be as high as 50%, the platform will attempt to match the buyer with a lender who provides the loan to complete the purchase. After this process is done, the purchased NFT is moved into an escrow wallet, where it is held until repayments are complete.
Essentially, as the prices of Bored Ape NFTs and others like them plummet, Teller Finance is enabling everyday investors to buy JPEGs of apes with hundreds of thousands of dollars on credit without any discernible affordability checks or regulations in place to protect anyone. It’s not hard to imagine what might go wrong.
The digital currency industry is getting desperate
As the liquidity crunch deepens, threatening to take even more of the industry’s key players down, exchanges and platforms are concocting all manner of schemes to stay afloat.
On top of offering vast sums of credit for JPEGs with zero utility, other signs of desperation include Coinbase (NASDAQ: COIN) turning to a monthly subscription model and the attempt by Bitstamp to introduce trading €10 ($10.11) inactivity fees. The former will involve $30 per month fees for unlimited trading of digital assets. The latter had to be walked back after a huge backlash by Bitstamp customers.
Thinking readers should realize two things:
1. These platforms are clearly desperate to keep the fees coming in by any means necessary.
2. It must be profitable for Coinbase to introduce a $30 a month model, indicating that its average user doesn’t even generate that in fees. If they did, there’s no way the firm would undercut itself by offering a cheaper alternative. That’s not a great place to be for what is touted to be the Amazon of the digital currency industry.
Another potential realization is that exchanges like Coinbase may not be trading digital currencies at all. Instead, they may be operating just like the fractional reserve banking system—moving digits around on a screen to denote who owns what while sitting on reserves of various currencies. Do they really have the reserves to allow everyone to cash their coins out if there’s a ‘run’ on the exchanges? As the Zen master said, we’ll see.
Bitcoin has nothing to do with any of these
None of these was what Bitcoin (BSV) was supposed to be about. It was never intended as a speculative asset, there weren’t supposed to be thousands of altcoins to trade on platforms like Binance, and Satoshi likely never dreamed that people would be naive enough to borrow enough to buy a family home to purchase an overpriced JPEG on credit.
Bitcoin was supposed to eliminate middlemen and fees, unleash hitherto unseen economic efficiency, and make it possible to build new, sustainable industries based on the micropayments it makes possible. It was supposed to be sustainable—generating enough fees to pay miners forever without the need to constantly pump the price of tokens.
This ‘pump it’ mindset is cancer at the heart of the industry, and it’s the reason why the schemes mentioned in this article are dreamed up in the first place; without an endless supply of new money, the whole house of cards will inevitably collapse.
Schemes like Ape Now Pay Later may stave off the inevitable end for a while, but they’ll do nothing to change the fundamentals; nothing lasts without real value and utility. Thankfully, both are being built on Bitcoin SV.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
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