It is a warning from within. And it comes when many have already been injured.
Palmer Jackson, a co-creator of dogecoin, one of the most popular cryptocurrencies, is raising the alarm about several crypto projects that he says are scams.
In a recent interview with the Australian site crikey, Palmer is asked about the crash in the cryptocurrency market this year.
When the interviewer asked his opinion on what experts have dubbed "crypto winter," the former crypto fan is merciless.
'I Wish It Was the End of Crypto'
"I wouldn’t say that it’s in a winter," Palmer said. "I still see heaps of money being funneled in by crypto promoters. They’re waiting for a fresh batch of fools to come in.
"This happens in cycles. You wait for a while for the collective memory of the world to forget about how much of a scam it is. We’ve had ICOs [initial coin offerings], DAOs [decentralized autonomous organizations], now it’s NFT [non-fungible tokens]."
He continued: "Sadly I wish it was the end of crypto, but it’s not."
"More holistically, in this system of griftonomics, hypercapitalism, rentier capitalism, increasingly people are doing nothing but making money off doing nothing, it’s kind of fucked us all up.
"It’s given people this weird mental issue that things that 5 to 10 years ago people would have the common sense to say 'that’s weird' are OK. Now, even if it’s fraudulent, they think, 'do I really care?'”
Palmer, a software engineer, created dogecoin with Billy Markus. The two had said that they'd decided to create a payment system as a joke. The coin was supposed to make fun of the wild speculation in cryptocurrencies.
But it has become one of the world's most valuable crypto, with a market value of $11.6 billion at last check, according to data firm CoinGecko.
"The bigger problem is because it’s so easy to grift now through crypto," Palmer said.
Chaotic Weeks, Trillions Lost
Palmer's remarks come as the crypto market is trying to stabilize after chaotic weeks. The market has lost more than $1.6 trillion since November. In addition to recession fears, the selloff has recently been fueled by the collapse of UST coin, also called TerraUSD, and its sister token, Luna.
UST and Luna crashed after UST lost its peg to the dollar, the foundation of its standing as a stablecoin. These are cryptocurrencies tied to a more stable asset like the U.S. dollar or gold.
UST lost its dollar peg when millions of investors all wanted to redeem their tokens at the same time. The currency, which is an algorithmic stablecoin, was backed not by dollar reserves but rather by Luna, which had to be burned, or permanently destroyed, through a computer code.
From May 9 to May 13, at least $55 billion of market cap disappeared, causing colossal losses to many investors. On social media, testimonies of financial ruin have followed, as TheStreet has reported.
A few days after this colossal failure, the founders of Luna launched a 2.0 version.
'It's Going to Be a Lot More Painful'
"I think there’s going to need to be a crash," Jackson said of the overall crypto market. "I think we’re well overdue for some sort of pop, and I don’t think it’s going to be a big boom.
"It’s going to be a lot more painful, and unfortunately it will probably affect minorities and those lower end of the socioeconomic spectrum when it happens.
"So, when people who have been suckered in, people who’ve been sold on the [viral cryptocurrency-promoting] Matt Damon commercial and who put their [retirement fund] 401k in, those are unfortunately the people who are going to be hurt."
Palmer, who has just started a podcast called Griftonomics, said the short-term solution is raising public awareness.
"I always like to look at the younger people like Gen Z and some of the TikTok generation. They’re not as sucked in easily as people being sucked into these grifts," Palmer said.
But "I think this does have to be solved at a political level."
