Ultimate magazine theme for WordPress.

The dark triads strike again

Crypto has fallen by over US$2 trillion in the past year, and contracted values are expected to stay low. The FTX crypto exchange, formerly worth $40 billion, has gone bankrupt. This has affected over a million users, including 30,000 Australians. The high-profile implosion is one in a string of collapses that started with Luna in May 2022, when the TerraUSD currency became unanchored. 

 

There is a crypto contagion taking hold of the market, and it threatens to destroy the whole ecosystem. But what is driving it?

 

“Cryptocurrency’s decentralisation is its biggest selling point but its Achilles heel while it is an emerging industry. It’s interesting because a lack of regulation in any area has historically attracted characters with dark triad traits,” says Ulrika Lobo, director of Sparrow Loans and host of inDebt with Ulrika Lobo, a podcast that explores the world of private debt in Australia.

 

The dark triad consists of narcissism, Machiavellianism, and psychopathy. People high in these traits are hardwired to manipulate and exploit others. They are single-mindedly focused on self-attainment, with a broken moral compass. While these traits seem to describe a cinematic villain, they exist on a continuum. This means that we all have a part of us that is narcissistic, psychopathic, and Machiavellian. 

 

“It just so happens that those attracted to the crypto industry rate much higher on the continuum. They float coins on exchanges with no real value and deceive investors into boosting them with expensive PR campaigns,” says Ulrika, “Their claims that they have reinvented finance and can deliver 20% returns with no risk are all pipe dreams. The shiny and philanthropic exteriors are designed to hide the fact that crypto is a speculative asset with no real value and little integration in the financial system.”

 

When Sam Bankman-Fried says he isn’t losing sleep over the FTX crash or that “it could be worse,” he means it. His tweets that ask “what h a p p e n e d” highlight how out of touch he is with the consequences of his actions. Yet the dark triad traits are not always bad; it is about how you use them. However, this rashness gives us important insight into the structure of the crypto market.

 

Cryptocurrencies are speculative assets with no commodity or government guarantee behind them. This provides a perfect space for coercive and narcissistic personalities to flex their persuasive strengths – rallying people behind currencies with no real value and little use in the world financial system. For these crypto vanguards, it is not about the applications of the currency but how quickly they can make it ascend and whether they can pull out before it goes bust.

 

How do they do this? 

 

“First, crypto platform leaders create their currency (tokens), assign an arbitrary value to the tokens, and float them on an exchange to be traded. The next step is broadcasting the unbelievable returns (around 20% is standard) that people can get with your currency to lure them in. Hype and speculation will do the rest, sucking in capital and creating windfall increases in values. This practice is known as yield farming and is a direct expression of the dark triad,” Ulrika explains, “They promise the world and deliver an Atlas.”

 

The Machiavellianism of crypto’s leaders in yield farming to lure in vulnerable people is the first pollution of the dark triad into crypto. 

 

“When the currencies inevitably collapse as prices crash, and the hollow interiors of the coins come to light, investors lose everything, not the platform founders. But they are so disconnected from their emotions that it means little to them. They will try again under a different business and hurt more people.”

 

Sam Bankman-Fried’s FTX exchange was underpinned by the dark triad. FTX tapped into over $10 billion in customer assets to fund risky asset purchases in its main investment vehicle, Alameda Research. On its books, Alameda had over $3.3 billion in secondary cryptocurrencies and over half of its US$15 billion portfolio in FTT. This gross failure of risk management left the company vulnerable. As cryptocurrencies tend to fall in tandem, being a speculative asset, there would be nothing left to shore up the company in a sudden downturn. These revelations about liquidity concerns prove that Bankman-Fried was not only convinced of his own infallibility but unable to think through the consequences of his actions.

 

Bankman-Fried’s narcissism leads to overconfidence which bled into his interactions with others. When pitching his vision for FTX to Sequoia Capital, he was playing League of Legends and talking about bananas being traded through his platform. Yet Bankman-Fried’s insolence and lack of respect didn’t cause a reprimand. Instead, it resulted in a 13,000-word hagiography, with its author claiming, “it was one of those your-hair-is-blown-back type of meetings.” Bankman-Fried’s narcissistic belief in his goodness drew sycophants around him like magnets.

 

Bankman-Fried also claimed to follow effective altruism. Effective altruism is not about donating money but investing in systems that help people build themselves. But to create independent communities, we need to address people’s base needs. This makes the narcissism and hypocrisy in Bankman-Fried’s desire to spend $15 billion on buying Twitter but keeping silent when the UN asked for $6.6 billion to avert famine in 2022 glaringly obvious. Bankman-Fried was all about image. In his own words, “I had to be. It’s what reputations are made of, to some extent. I feel bad for those who get fucked by it by this dumb game we woke westerners play where we say all the right shibboleths, and so everyone likes you.” 

 

“Speculative assets create bubbles, so when one falls, it creates shockwaves throughout the market,” says Ulrika. In the wake of the FTX collapse, crypto bank Genesis has halted withdrawals on the US$2.8 billion it holds in active loans. A reckoning is coming to cryptocurrency as the rotten core of platform leadership and investments is exposed.

 

 ____

About inDebt with Ulrika Lobo: Hosted by Ulrika Lobo, inDebt with Ulrika Lobo is a podcast that dives into the stunning world of borrowing and investing in debt.

 

About Sparrow Loans: Sparrow Loans delivers fast and flexible short-term loans to support your business.

 

About Ulrika: Ulrika Lobo (BA, BE, MBA, MAppFin, DipFMBM) is the director of Sparrow Loans, achieving the Entrepreneur of the Year Award from WSW Awards in 2021 and was a finalist in the Director of the Year category in the national Women in Finance Awards (2022, 2021). She runs the first female-founded private lending business in Australia.

_______ LONG FORM VERSION _________

 

 

Crypto has fallen by over US$2 trillion in the past year, and contracted values are expected to stay low. The FTX crypto exchange, formerly worth $40 billion, has gone bankrupt. This has affected over a million users, including 30,000 Australians. The high-profile implosion is one in a string of collapses that started with Luna in May 2022, when the TerraUSD currency became unanchored. 

 

There is a crypto contagion taking hold of the market, and it threatens to destroy the whole ecosystem. But what is driving it?

 

“Cryptocurrency’s decentralisation is its biggest selling point but its Achilles heel while it is an emerging industry. It’s interesting because a lack of regulation in any area has historically attracted characters with dark triad traits,” says Ulrika Lobo, director of Sparrow Loans and host of inDebt with Ulrika Lobo, a podcast that explores the world of finance and private debt in Australia.

 

The dark triad consists of narcissism, Machiavellianism, and psychopathy. People high in these traits are hardwired to manipulate and exploit others. They are single-mindedly focused on self-attainment, with a broken moral compass. While these traits seem to describe a cinematic villain, they exist on a continuum. This means that we all have a part of us that is narcissistic, psychopathic, and Machiavellian. 

 

“It just so happens that those attracted to crypto leadership roles rate much higher on the continuum. They float coins on exchanges with no real value and deceive investors into boosting them with expensive PR campaigns,” says Ulrika, “Sam Bankman Fried used his shiny and philanthropic exterior to hide the fact that crypto is a speculative asset with no real value and little integration in the financial system.”

 

When Sam Bankman-Fried says he isn’t losing sleep over the FTX crash or that “it could be worse,” he means it. His tweets that ask, “what h a p p e n e d” highlight how out of touch he is with the consequences of his actions. Yet the dark triad traits are not always bad; it is about how you use them. However, this rashness gives us important insight into the structure of the crypto market.

 

The fact that someone can lose $40B in a day, and positions it such that it could be worse, is rashness that gives us important insight into the structure of the crypto market.

 

By its very nature, crypto is decentralised, meaning it has no government or central authority to control it. Cryptocurrencies are speculative assets with no commodity or government guarantee behind them. This provides a perfect space for coercive and narcissistic personalities to flex their persuasive strengths – rallying people behind currencies with no real value and little use in the world financial system. For these crypto vanguards, it is not about the applications of the currency but how quickly they can make it ascend and whether they can pull out before it goes bust.

 

This opens the door for dark traits to pollute crypto from the get-go.

Without the need for a central body to steer the ship and a lack of accountability from minimal legislation, the dark personalities of crypto leaders and platform executives are drawn to crypto like moths to a flame and, in turn, become drivers of incredible instability. Their claims that they have reinvented finance and can deliver 20% returns with no risk are pipe dreams. 

 

What SBF has taught us specifically is that dark triad traits hide very well behind philanthropic exteriors.

 

 

How do the dark triads exploit the market in crypto?

 

“First, crypto platform leaders create their own currency (tokens), assign an arbitrary value to the tokens, and float them on an exchange to be traded. The next step is to broadcast the unbelievable returns (around 20% is standard) that people can get with your currency to lure them in. Hype and speculation will do the rest, sucking in capital and creating windfall increases in values. This practise is known as yield farming and is a direct expression of the dark triad,” Ulrika explains, “They promise the world and delivers an Atlas.”

 

The Machiavellianism of crypto’s leaders in yield farming to lure in vulnerable people is the first pollution of the dark triad into crypto. 

“When the currencies inevitably collapse as prices crash and the hollow interiors of the coins come to light, it is investors who lose everything, not the platform founders. But they are so disconnected from their emotions that it means very little to them. They will simply try again under a different business and hurt more people in the process.”

 

This bias towards the value system of a philanthropist sucked in a lot of people to trust Sam as they see fraudulent, irresponsible and narcissistic behaviours as incongruent with an altruistic person. We looked at his clothes and his Corolla to make the judgement on his humility and focus on work when really he was living in the most expensive penthouse in the Bahamas the whole time! How did we make that make sense? He had promised to give away all his fortune in the NasDaily video about his philanthropy, a billionaire at the time that had only invested $50M at that point. 

 

The image of the altruistic billionaire just helped him raise more funds and get more exposure. His intents were hiding in plain sight. At the height of his wealth, he had only donated less than 2% of his wealth, all while living in a luxurious residence in a tax haven. Effectively the donations are the cost of his PR exercise, and also created an image that people love, fulfilling his thirst for acknowledgement and the spotlight. Who doesn’t love someone who promises to help the world’s most vulnerable? Nevertheless, the PR spiel isn’t adding up.

 

Sam Bankman-Fried’s FTX exchange was underpinned by the dark triad. FTX tapped into over $10 billion in customer assets to fund risky asset purchases in its main investment vehicle, Alameda Research. On its books, Alameda had over $3.3 billion in secondary cryptocurrencies and over half of its US$15 billion portfolio in FTT. This gross failure of risk management left the company vulnerable. As cryptocurrencies tend to fall in tandem, being a speculative asset, there would be nothing left to shore up the company in a sudden downturn. These revelations about liquidity concerns prove that Bankman-Fried was not only convinced of his infallibility but unable to think through the consequences of his actions.

 

Bankman-Fried’s narcissism leads to overconfidence which bled into his interactions with others. When pitching his vision for FTX to Sequoia Capital, he was playing League of Legends and talking about bananas being traded through his platform. Yet Bankman-Fried’s insolence and lack of respect didn’t cause a reprimand. Instead, it resulted in a 13,000-word hagiography, with its author claiming, “it was one of those your-hair-is-blown-back types of meetings.” Bankman-Fried’s narcissistic belief in his goodness, and his rise to fame, drew sycophants around him like magnets.

 

But in the case of SBF, how did he orchestrate his altruistic image so well that we didn’t spot it?

 

It comes down to a concept called authority bias. Authority bias states that we trust figures in positions of power or influence more willingly than those who are not. Sam Bankman-Fried built his credibility from industry professionals, popular news sites and social media influencers. By signing the billionaire’s pledge to give away all his wealth, driving a Corolla, and sleeping on a beanbag, he became an easy person to get behind. Enormously influential publications like Bloomberg and Fortune wrote articles that fawned over his “Robin Hood-like philosophy,” applauding the daggy but brilliant altruist they wanted to see. The audience of these publications bought into the narrative they were presented with as they trusted the credibility of these platforms. In one viral youtube video with over 1.6M views, NasDaily canonised him as the “world’s most generous billionaire” and stated that his “goal as a human is to make as much money as possible just to give it away.” 

 

Bankman-Fried leveraged influential news outlets and media channels to cement his reputation as a charitable billionaire, covering up the dark side of his personality. Bankman-Fried also claimed to follow effective altruism. Effective altruism is not about donating money but investing in systems that help people build themselves. But to create independent communities, we need to address people’s base needs. This makes the narcissism and hypocrisy in Bankman-Fried’s desire to spend $15 billion on buying Twitter but keeping silent when the UN asked for $6.6 billion to avert famine in 2022 glaringly obvious. Bankman-Fried was all about image. In his own words, “I had to be. It’s what reputations are made of, to some extent. I feel bad for those who get fucked by it by this dumb game we woke westerners play where we say all the right shibboleths, and so everyone likes you.” 

 

“Everyone needs to understand the personalities behind the investments they back. Ultimately, and until it matures and draws in better players, crypto remains a speculative asset. Speculative assets create bubbles. When one falls, it creates shockwaves throughout the market,” says Ulrika. 

 

In May, it was Luna, a cryptocurrency entangled with the doomed TerraUSD that wiped out $85 billion in value. In June, it was Celsius, an experimental crypto bank forced into bankruptcy over a nearly $2 billion shortfall. Now FTX has fallen and evaporated $40 billion worth of investor funds.

 

In the wake of the FTX collapse, crypto bank Genesis has halted withdrawals on the US$2.8 billion it holds in active loans. A reckoning is coming to cryptocurrency as the rotten core of platform leadership and investments is exposed.

 

It seems that the only thing growing in cryptocurrency is the casualty rate.

 

 ____

About inDebt with Ulrika Lobo: Hosted by Ulrika Lobo, inDebt with Ulrika Lobo is a podcast that dives into the stunning world of borrowing and investing in debt.

 

About Sparrow Loans: Sparrow Loans delivers fast and flexible short-term loans to support your business.

 

About Ulrika: Ulrika Lobo (BA, BE, MBA, MAppFin, DipFMBM) is the director of Sparrow Loans, achieving the Entrepreneur of the Year Award from WSW Awards in 2021 and was a finalist in the Director of the Year category in the national Women in Finance Awards (2022, 2021). She runs the first female-founded private lending business in Australia.

 

 

 

Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers

Comments are closed.

%d bloggers like this: