What the instability in cryptos shows?

Here's my take on the #FTX situation, cryptocurrencies, and #Bitcoin. The instability in cryptos shows the important function of central banks in any good monetary and financial system. 

KYLE'S VIEW

For those who aren't aware, I'm not an advocate for central banks. Our over reliance onmonetary policy for decades has manifested in gross inequalities, economic inefficiencies.and political and social instability.

Central banks, sometimes because of a failure of government, sometimes because of economic circumstances, sometimes because of academic overeach, have done too muchand arguably caused more harm than good.One thing that central bank' have often done well, though - and gives reason to their existence - is act as a lender of last resort andensure efficient market making in times of financial panic and instability.

Overnight we saw fresh turmoil in crypto markets. A key reason for the series of blow-ups in the crypto-world this year is a lack of a calming, centralized, lender-of-last-resort and market maker to maintain confidence. Financial systems are founded on trust and confidence.

When trust and confidence are eroded, perhap by something as simple but pernicious as arumour, the system fails. Humanity has learned this through harsh experience. Over time, we've established rules and systems to mitigate its risks and costs.

Obviously, the lack of a centralized authority is a feature and not a bug of cryptocurrencies. However, it's the reason why l am of the strong opinion that a complex, modern financialsystem can never built off a decentralized and digital network.

Digital assets and crypto are powerful, often useful and likely here to stay. But the grand visions propounded by maximalists ignore the lessons of history and what it takes to createa good financial system.

The mood dictates it is time for Buffettisms. Maybe a good example of how if you don't really understand how a business makes money, don't invest in it.

$Bitcoin Group SE(BTGGF)$  $S&P 500(.SPX)$  $DJIA(.DJI)$  $NASDAQ(.IXIC)$

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