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The hype around AI warrants closer inspection. It’s February, and AI is already being called the top trend of 2023. Are we that sure nothing interesting will happen over the next 10 months? If you’re being told what is currently called “artificial intelligence” right now is akin to Schwarzenegger’s memorable performance in Terminator, you should be skeptical too.

As of right now, AI represents nothing more than a bunch of specific instructions on how to act. It’s no different than the operating system or the program you’re using. Even chat bots are very dated.

The thing is, a lot of people don’t care, and they want to invest in it. This is where the crypto investor with any kind of crypto exposure wants to start paying attention. Walter Teng, vice president of Digital Asset Strategy at Fundstrat Global Advisors, had this to say about the crypto AI investment fad:

“Seems like [FOMO], boredom, degeneracy, wanting to make it back.”

A little gloomy. An analysis of search engine results shows that “how to invest in AI” is trending. Well, how do you actually invest in AI? There’s stocks… Believe it or not, not everyone has access to the NYSE. For many, stocks aren’t an option whether due to accessibility, familiarity, lack of company transparency and so on.

The only other alternative is crypto, and the subsequent “crypto AI” searches show it. Compared to stocks, but also in general, crypto is easy to invest in and very easy to hold. You can’t exactly store stocks on a hardware ledger that nobody but you has access to. In turn, AI-related tokens have blown up in value. What will become of them, and the whole AI thing?

The struggle to replace human labor with that of the machine variety has been less than fruitful. Even the most advanced machine in any factory still needs human operation. So-called smart cars crash into each other. Algorithms need constant human updating. And when we get to more exotic things like customer support, you might as well be interacting with a brick wall.

So the only thing we can glean so far from this whole thing is that crypto is taking some kind of space next to the stock market. It wants a seat next to it, one that says: “I offer speculative investment.”

The truly remarkable thing, however, is that this is pretty far from crypto’s base use case. It’s far even from second-row uses: when crypto developed a correlation with stocks, Bitcoin was somewhat amusingly criticized for not being a good store of value compared to gold. While Bitcoin obviously should protect wealth to an extent, its real use is that of a decentralized currency. Merely operating well in this capacity would be enough for many.

Yet crypto is so functional and so operational that investors can’t help but find other uses for it. Nevermind transactions: first, we wanted to store wealth in it securely. Now, we want something akin to growth stocks.

So we’d say Teng is maybe missing out on some truly positive developments here in his commentary. It’s as if speculation about whether crypto is hear to stay or Bitcoin is truly, finally, undeniably dead have evaporated.

Some years ago, the mere introduction of cryptocurrencies brought on the term “legacy finance”. While traditional finance is still there and doing its thing, that was a big deal to us. Are stocks becoming legacy speculative assets now that hot crypto projects are easy to invest in? Perhaps akin to bonds, whose market has collapsed while crypto staking offers good yields and actually more safety? We don’t know, but we like the idea.

• Credit Suisse, one of the biggest banks ever, signaling collapse… it’s like the private sector Federal Reserve
• Silvergate’s collapse, still being attributed to FTX to some degree
• SVB’s collapse due to “poor risk management”

And just a little bit more from Tětek before we try to unpack the state of affairs:

“Banks no longer actually hold our money, but lend it out and buy volatile assets with it. Depositors are, in fact, the banks’ creditors. Understandably, people are looking for alternatives such as Bitcoin.”

He is very much on point, but what does he mean when he says “no longer”? The last time banks held our money 1:1 was… the 17th century? Maybe. The absurdities of the banking system have been well-known for a long time, and this was the case in 2008. But what happened then, and what happened now?

Well, we have Bitcoin now, but that’s only going to be relevant to a degree. The banking system was supposed to collapse between 2008-2011, and didn’t because of a “too big to fail bailout”. A luxury FTX didn’t enjoy, hence the billion articles slamming it.

There isn’t really a reason why there wouldn’t be another bailout. There might not be, if whoever is pulling the strings wants a financial collapse. But assuming things are the same on that front as some 15 years ago, Credit Suisse absolutely fits the much-desired “too big to fail” label. So we might get more monetary debasement, the ultra-rich being bailed out with poor people’s money and all that good stuff.

It’s a little annoying that this is unfolding right as some are calling crypto unregulated and what not. Well, where’s the regulation for traditional banking? And isn’t regulation on crypto just going to prevent it from protecting us against permanent lack of regulation on traditional finance? Depends what you’re doing with your crypto.

Let crypto do its thing by using it properly

Tětek reiterated that self-custodied crypto of the decentralized kind is the best kind of crypto. By leasing out custody to exchanges through hot wallets and adopting projects with agendas, aren’t we setting ourselves up for more of the same?

Yes, BitIRA does a little bit of both to satisfy both customers and the government. We try to offer appealing but tested projects, and give the most secure form of storage available for a digital IRA. Unlike the money in your bank account, the crypto in your digital IRA isn’t the custodian’s to lend.

Still, it’s a shame that this erosion of trust that’s coming from traditional finance is enveloping crypto. More banks are imploding than crypto exchanges, and yet all we hear is FTX, FTX and more FTX. Binance’s outflows any time there’s a flare-up tell as much.

The traditional banking crisis is, of course, one of liquidity. Having done bad things with our money, they don’t have enough reserves. Nevermind the whole gold contracts bit. Credit Suisse is reassuring clients that it’s liquid enough, but less and less are believing it. If there comes a point when it’s clear that the banks aren’t liquid enough, there is either going to be a bailout or a bail-in. Neither are going to be pretty.

True to Bitcoin’s purpose and underlying workings, it can’t be taken from you in such a manner because it’s held in offline storage. That goes for quite a few other cryptos, too. Crypto stored on an offline ledger can’t be used as collateral even if a third-party is taking care of its custody. Even if the custodian turns mad, there’s still the multi-layered protection of the offline ledger that only you can remove. If only Credit Suisse had something of the sort in its offering…

Photo by Kanchanara on Unsplash