Governor of the Central Bank of Jordan launched yesterday its FinTech and Innovation Vision1.
There was of course no mention of Bitcoin or any other crypto currency. I personally stand with CBJ’s position of banning crypto in Jordan (except for blockchain) - and I am also for a Central Bank Digital Currency:
Some of you will claim that the CBJ (and I) live in prehistoric times and need to embrace the digital future.
So here are some free financial advice on how to invest in crypto, the same advice one could use for any other investment.
Do Your Research
a. Where to buy/sell?
First place people would go to buy crypto in the Middle East would be a Crypto Exchange. Most crypto exchanges in the region are currently based in the Gulf (with Dubai and Manama fighting on becoming the next capital of virtual assets in the world). Some of these exchanges will boast on having been granted a license by the central banks of these countries to operate a crypto exchange (in my opinion these licenses are as useless as a degree from the South Harmon Institute of Technology).
Before jumping into any exchange, you need to check on these first:
-Is the crypto exchange listed on any market aggregator? For example here are the exchanges from the United Arab Emirates. Bitoasis, Coinmena, Rain are not listed as they are simply using some other exchange. Does the exchange hold enough reserves (and are these reserves audited)?
-Is KYC mandatory to open an account to purchase crypto? Can you open the account directly with them? If not, is it done by a non-registered shady broker?
-Once you deposit your hard earned money into those exchanges and convert them into cryptocurrency, do you really own those cryptocurrencies? And how much are you paying for each transaction in terms of fees?
One way to check all of the above is from real user reviews and comments online as well as looking into the “TERMS OF SERVICE” of each exchange that can be found on their websites (this is very important and you will be surprised on what you find. The law won’t protect the idiot who didn’t read the terms and conditions they signed up to).
I have to admit, one of the good aspects of cryptocurrency is the transparency of the blockchain. You can see where everything is going.
Since the cryptocurrency Ripple (token known as XRP) made headlines recently with its lawsuit with the Securities and Exchange Commission in the United States, and the price of XRP ripping up 72% on the day, let’s use it as an example. If you decide to open an account with any exchange, you can find that exchange on xrpscan.com ; You should immediately get a wallet that has a unique ID/address. You need to make sure that the cryptocurrency XRP which you exchanged with your own funds really did end up in your wallet.
From the above, one might notice that the exchange is not really a place where average users (with their average wallets) are trading/swapping crypto between themselves. On the contrary, exchanges are dealing with themselves and that is why a lot of crypto skeptics accuse them of wash trading2 and spoofing3.
b. What is crypto and what will it be used for?
A lot of investors are tapping into cryptocurrency because they believe that one day, crypto will play a huge role in the future. What that future might be or what uses will crypto have, no one is really capable of answering. So far it is all talk (of the future) and no actual show for this financial technology.
Some investors went so far as to invest in the technology and infrastructure behind crypto such as Bitcoin mining. Not only has that led to a shortage in chips ( NVDA 0.00%↑ ), it is also bringing in a lot of losses to investors.4
Most normal retail investors do not have a background in information technology, let alone blockchain, in order to understand all the differences between token X or token Y.
As the SEC famously advised (and this should be considered financial advice 101)
Unlike most financial instruments, cryptocurrencies don’t pay any dividends to the investors. They are not really securities where there is an underlying enterprise behind the crypto token you own. So you end up holding a virtual asset that should increase in value over time (just like Gold).
Basically, crypto exchanges are just Virtual Casinos filled with countless virtual tokens to play with.
Don’t Bet the House
During COVID, we heard of the “Golden Ant”5 scam where vulnerable individuals bet their whole savings in hopes to get a good return to secure their future. Others went even further, mortgaging all theirs assets including their house, their car, and even their families.
When it comes to investing in risky assets, the safest bet would be to avoid leverage, and invest only what you can afford to lose.
Only two places do we see returns of >100% in less than a year: casinos and frauds.
Rarely do we see returns that high when the benchmark return for stock market / bond market is ~5-10%
Unlike your bank deposits, crypto wallets (where you store your cryptocurrencies) are not insured by any government. So the best advice would be to store your cryptocurrencies on a hard wallet/ cold storage6. It would be like the good old times where you kept your bond/share certificates in a safety deposit box.
If you decided to go the DeFi (decentralised finance) route, you better make sure to always have backups of your backups when it comes to your “keys”. Unlike in Jordan, where you only need your ID to get access to your bank account/real estate records etc.. In the crypto universe, where everything is anonymous and decentralised, there is no help desk or support to assist you in regaining access to your crypto wallet.
Grim Outlook for Crypto
Crypto will be taxed starting 2026 in the United States of America (for financial year 2025). Crypto Winter, which started in November of 2022 with the collapse of FTX, seems to be dragging on. The biggest exchange, Binance, is being witch hunted for laundering money for the Russians and Iranians. Justin Bieber’s monkey NFT, which he purchased for $1.3 million is now worth around $40,0007. Real estate prices have fallen around 90% in the Metaverse8.
The future looks really bleak for crypto and web3.
The only future I see is the disappearance of large Crypto Exchanges and smaller exchanges popping up offering On/Off Ramp services (similar to the one down your street where you would go to exchange Lira before travelling to Istanbul). These are the unintended uses of crypto. For the Turks9 and the Lebanese, crypto has become a great way for the Diaspora to transfer funds cross border or to hedge against inflation in their country. Others of course are using crypto to bypass embargo and sanctions, launder money etc. Which in turn will bring in even more regulation to the space.
According to most crypto nerds, the whole crypto ecosystem is being held on the shoulders of the biggest Ponzi scheme in crypto: Tether10.
A lot are claiming that once Tether/USDT collapses, the crypto space will be cleaned up and real crypto projects would start to blossom 🌺.
Until then, here are some recommended crypto skeptics to check out:
CoffeeZilla and how he exposes scams/rug pulls:
Stephen Diehl:
Molly White (and ongoing investigation on FTX/Sam Bankman Fried):
https://www.mollywhite.net/etc/ftx-contagion
Good advice to follow, check if the broker is officially registered: https://www.jsc.gov.jo/News/ar/3141
Investopedia article on Hot vs Cold Wallets: https://www.investopedia.com/hot-wallet-vs-cold-wallet-7098461#:~:text=Hardware%20wallet%3A%20This%20is%20a,no%20access%20to%20your%20crypto.
BAYC floor price is now 30 ETH https://opensea.io/collection/boredapeyachtclub
Digital Land Gateway: https://wemeta.world
Tether Insolvency Calculator: https://www.tethertransparency.com