The present day, John Reed Stark, a digital regulatory compliance expert with 15 years as an SEC enforcement attorney, shared an exhaustive critique of the NFT market and the crypto industry in general on the social media platform X (formerly known as Twitter). Stark compared the NFT market to โPet Rocks on Steroidsโ and warned that the cryptocurrency market is following a similar downward spiral.
Rigid aforementioned A recent study reveals that 95% of the 73,257 NFT collections analyzed now have a market capitalization of zero ether. The most common price of an NFT has dropped to between $5 and $10. He argued that the NFT market is not only inorganic but also highly manipulated. He asserted that market manipulation and fraud are not only rampant but encouraged, creating an environment in which venture capitalists and Wall Street speculators have exploited retail buyers.
Turning his attention to the crypto industry in general, Stark described it as a modern adaptation of fables such as "The Emperor Has No Clothes" and "The Pied Piper of Hamelin." He explained why cryptocurrencies fail as an investment, citing the absence of regulatory oversight, transparency, consumer protection, insurance, licensing, and net capital requirements. Stark also noted that the cryptocurrency market is rife with market manipulation, insider trading, and fraud, making it a dangerous venture for investors.
Stark also criticized the failure of cryptocurrencies as a currency, highlighting its price volatility, high fees, and onerous taxes. He argued that these factors make it impractical for anyone to accept cryptocurrency as payment, as its value could plummet the next day. He also highlighted that cryptocurrencies lack intrinsic utility and benefit, making them a poor store of value.
In terms of financial inclusion, Stark debunked the notion that cryptocurrencies serve as a financial equalizer for the unbanked. He cited multiple studies and reports indicating that cryptocurrencies have become a form of affinity fraud, disproportionately affecting disadvantaged and disaffected communities. Stark emphasized that the current capabilities of cryptocurrencies do not align with the needs of the groups it claims to serve, thus worsening their financial situation.
Stark also discussed the stark contrast between traditional financial systems, which he believes have some form of government protection, as opposed to crypto platforms, which he believes lack such safeguards. He mentioned that in the rare case of a bank failure, there are legal barriers such as insurance and federal property to protect depositors. However, he notes that when a crypto platform fails, there are no such US government protections, leaving customers vulnerable.
Additionally, Stark referred to the limitations of blockchain technology. He described it as a limited, glorified, annex-only writing spreadsheet and immutable ledger that provides little utility. He warned that blockchain faces significant obstacles to evolving into the financial and social solution its promoters have promised for more than 15 years.
In his closing remarks, Stark called the crypto ecosystem inherently fraudulent. He warned that this contagion is spreading, turning victims into perpetrators, leading to the demise of fiat currency and resulting in a cycle of crime deeply rooted in the crypto ecosystem.
On August 18, 2023, Stark expressed skepticism about the likelihood of the SEC approving a Bitcoin spot ETF. Stark cited a study indicating widespread market manipulation in the cryptocurrency sector, particularly involving automated bots on social media platforms such as Twitter. He gave as an example the case of the hedge fund FTX Alameda Research.
Stark criticized the cryptocurrency market for its lack of traditional financial metrics, making valuation more speculative than analytical. He also pointed out the absence of regulatory oversight, which leads to a lack of transparency and consumer protection. Stark observed a trend in which victims of crypto fraud become perpetrators, exploiting social media platforms to spread misinformation. He warned that the illusion of freedom from traditional financial systems leaves investors vulnerable, especially when platforms like FTX, Celsius and BlockFi fail. Stark concluded by urging caution, emphasizing that the average investor often becomes prey to a predatory market.
Featured image via Halfway through the trip
