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Crypto markets are in a bearish trend with prices dropping continuously over the past few months. The market had been on a bull run for most of 2021, and sustaining such price increases is no longer possible. As prices drop, crypto companies that have kept their operations going by selling assets, or keeping afloat with venture capital, will get hit harder than others. Crypto companies with a sound business model and cash reserves can ride out the storm and continue operations when prices rebound. However, those without liquid assets or adequate operating capital may not be so lucky. Crypto companies going out of business is nothing new, but recently we’ve seen an unprecedented wave of bankruptcies as more and more businesses fail at an accelerated pace. Cryptocurrency has grown exponentially since its inception, making it extremely difficult for any company to stay afloat if they don’t have access to enough capital from outside investors or venture capitalists. Therefore, many crypto companies that can’t afford to keep operating once the bear market hits will eventually file for bankruptcy protection just like other industries do when they cannot pay back loans from outside investors anymore.
What is bankruptcy?
Bankruptcy is a legal process where a business creditor can get partial or complete ownership of the assets of the business in return for canceling all of the business’s outstanding debts. Each state has its own bankruptcy laws, and even if two parties file for bankruptcy at the same place and time, their bankruptcy proceedings can be very different. Bankruptcy is a process for relieving monetary distress. It does not give a company protection from creditors.
The current state of Crypto Companies and the bankruptcy wave
The cryptocurrency market fluctuates drastically, with some massive price swings. As the market went from bear to bull and back again, many investors lost all of their money. Now as the bear market continues, even more crypto companies are finding it difficult to survive. The cryptocurrency market is extremely volatile, which makes it very difficult for companies to operate and maintain their operations if prices drop significantly. As prices drop, many crypto companies that have kept their operations going by selling assets, or keeping the business afloat with venture capital will get hit harder than others. As the bear market continues and prices continue to drop, more and more crypto companies will file for bankruptcy protection.
Why are Crypto Companies Filing for Bankruptcy?
The cryptocurrency market is extremely volatile, making it extremely difficult for any business to survive if they don’t have access to enough capital from outside investors or venture capitalists. Entrepreneurs that want to start a crypto business usually need to raise money from investors that want to buy tokens at a later date for a higher price. However, the cryptocurrency market is extremely volatile, making it extremely difficult for any business to survive if they don’t have access to enough capital from outside investors or venture capitalists. This has led to an increase in the number of crypto companies filing for bankruptcy protection.
The 5 stages of a Crypto Company’s bankruptcy process
The process of filing for bankruptcy protection begins with founders noticing the company is in trouble. Next, they attempt to find investors to help keep the company afloat. They try to sell assets, borrow money, or find other ways to generate cash. If those methods fail and the company is close to bankruptcy, they file a bankruptcy petition with the relevant court. Finally, the court approves the petition and appoints a trustee to oversee the liquidation of the company’s assets and the repayment of all of its creditors.
The wave of bankruptcy filings in the cryptocurrency industry is a normal part of the industry’s growth, and this process is natural for any growing industry. However, the increase in bankruptcy filings has been dramatic, and cryptocurrency investors should take note of this trend. While crypto companies filing for bankruptcy is a normal part of any growing industry, the increase in bankruptcy filings has been dramatic, and investors should take note of this trend. The cryptocurrency market is extremely volatile, making it extremely difficult for any business to survive if they don’t have access to enough capital from outside investors or venture capitalists. Entrepreneurs who want to start a crypto business usually need to raise money from investors who want to buy tokens later for a higher price. The cryptocurrency market is extremely volatile, making it extremely difficult for any business to survive if they don’t have access to enough capital from outside investors or venture capitalists. This has led to an increase in the number of crypto companies filing for bankruptcy protection.
Reminder: I am not your financial advisor.
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The Future of Machine War II
In late 2021, I wrote an article about A.I. vs. Blockchain. I realized it was closer than I expected.
Web2 is leading a future of technological centralism.
The way we see the world in ancient is what we saw became what we believed. Later, the enlightenment process helped humans realize what they had seen was disguised by the nature principle. Once we tested our assumption and received accurate results, we thought we had mastered the nature principles. Yet, we did not make the world better than we thought we could.
We are living in a world in which companies know more than you than yourself. Companies can likely tell you what you should believe without letting you know.
The secret weapon that companies like Google invented is A.I. or Artificial Intelligence.
If A.I. can think like a person, it can easily replace you! Since companies got all your data, you freely offer them by using their free services, and they can replace you one day without you realizing it.
Without all conspiracy theories behind what Google may or will secretly develop, A.I. reaching consciousness is … impossible.
If it does, Google has successfully made a human – dumb!
The most advanced A.I. – Tesla Autopilot Program cannot distinguish objects between humans and other moving objects during driving.
Using technology makes people dumber than they think because it takes away your consciousness – the ability to think uniquely!
Blockchain is the future of decentralization.
We need a peer-to-peer system to regain consciousness and break the chain from Web2.
It gives individuals the power to rethink information.
Think about today’s media; all information is filtered to offer readers without any surprise. News is data that Web2 selected specifically for you to read.
We need a decentralized system so that you can receive unfiltered information and gives you a surprise that sparks ideas of imagination.
Web2 is afraid of the blockchain because they are too big to fail.
They mimic the blockchain by creating a centralized node system – social media network.
It is a net growing outward through a single point. Only the problem is that connection is facilitated by technology. And the biggest failure is such technology has a single point of failure problem.
And they cannot escape the law of economics – the law of diminishing. So we will see Web2 grow slower due to the law of diminishing that they require more data with few increments of advancement through A.I. without any breakthrough because A.I. is a deterministic system that works with a lack of randomness.
In Web2, they assumed everyone was stupid, and they offered solutions to everyone.
In Web3, everyone is good and should anticipate solving a problem together.
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Financial sanction to mixers
Have you heard about financial sanctions from the US on virtual currency? At least, I have not yet. But the US Department of Treasury has issued sanctions on two crypto services: Blender.io and Tornado Cash.
To clarify, the US sanctions on tools but not target specific entities or groups of people.
So why bother to sanction something that the government probably won’t be able to sanction in the first place?
What is a mixer?
A cryptocurrency mixer, sometimes referred to as a tumbler, is a tool for money laundering. The sole purpose of the invention is to make transactions untraceable.
How to mix?
Even crypto is pseudo-anonymous, but it is traceable through your wallet address. A mixer is a black box service to filter your traceable wallet address into the untraceable wallet address.
How to wash your money clean in the traditional way?
The assumption is you will not get caught at each stage, and then you place your dirty money in a bank through companies and use the funds to purchase legal goods like houses or luxury goods.
There are mature regulations and rules to stop you from putting your dirty money into banks.
Digtial money landury
A Crypto mixer or tumbler is a service to pool dirty digital currency in their favor and redistribute it into designated wallet addresses or addresses randomly generated.
It is a challenge to stop transactions because there is no entry point for law enforcement to stop at each stage.
Tornado Cash is the king of the mixer. Unfortunately, there is just no way to trace transactions anymore. It is a smart contract with zk-SNARKs (zero-knowledge proofs) that does not require revealing a wallet address during transactions and ghostly distributed funds without leaving any traces.
This tool is the ultimate weapon that the government has to shut down, or there is no way to prevent transactions.
Let’s change the future – legally.
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Why there is not crypto banking exist
We have always heard about cryptocurrencies, crypto exchange, banking, and trading platforms, but we do not really grasp the idea of crypto banking. Crypto banking is a contradicted idea. If crypto is to replace banks and give users full control of digital money, why do you put your crypto into the bank? The new research paper argued that there are risks for banks to adopt crypto, but they did it anyway.
Banks want crypto
Cryptocurrency has a rough road at the beginning and continues to experience a bumpy road ahead. The institutional investors were watching its performance. In early 2017, institutional investors had opportunities to adopt crypto, but they found out the return of the investments was less than traditional financial assets. Regulations were not a concern for some individual institutional owners, but banks were conservative at the time. As a result, some investors adopted it in early 2018 than banks did. Then suddenly, the crypto market took off in 2020, leaving many banks to regret their decision in 2017. Many banks set up their digital investment group to rush into the market and increase prices. Of course, many of their investment positions are instead of shadow positions. It is unclear how much they have been invested in and what vehicles they took to invest in cryptos.
Crypto exchange is a bank-like platform for crypto. Banks offered a place to purchase fiat currency. Crypto exchange did the same duty as traditional banks did. Since there was a gap between the crypto and banks, the crypto exchange took responsibility and offered crypto services. The crypto exchange took off after 2020, and they left banks in the dust. Then, crypto winter came in early 2022, and banks again hesitated to enter the crypto and started denouncing crypto usage, particularly in the Defi area. But interestingly, they tried to find ways to get into crypto without being directly exposed to cryptocurrencies—hint: through hedge funds.
How much banks exposure to crypto
We do not know how much banks have been exposed to crypto. We learned that the big Wall Street players were exposed to the services of the digital asset through State Street of their $41.7 trillion assets. Some have been exposed due to Luna’s collapse and 3AC bankruptcy. But again, no specific dollar amount was provided.
Since the crypto winter, institutional investors have been cautious about crypto exposure. However, crypto exchanges are the winner again. They are exposed to crypto and take risks more than banks do. As a result, they likely will weather the uncertainty. Furthermore, there is no need for crypto banking to handle your crypto assets since many such services will not survive long in the crypto environment.
Crypto is resilience
Despite its fluctuating price and unsecured assets, crypto is resilient to phase out any bad business ideas and bad actors in the economy who wants to or try to dominate the market but who transfers risks to users to believe they are the one who should take responsibility for their carelessness. Unfortunately, those business models will not survive long.
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