Disclaimer: Everything we write in "The Crypto Insider" newsletter is an x-ray of the industry as we see it, through the lens of publicly available information. We are not financial advisors. I read the tweetstorm of Sam Trabucco from Alameda several times because I realized that I don’t have all the tools needed to understand a concept that Kain also mentioned in The Stakeborg DAO Talks: what an efficient market means when we refer to crypto.
With the risk of being philosophical, is any market really efficient?
It's a shame that semantics suffered a great deal over the centuries - from Adam Smith till present times. The way industry expert talk about, say full employment or market efficiency, and the way layman people perceive these terms is asymmetrical. An economist can skew public perception on the state of the economy, arguing that their country runs on full employment, all the while discounting the fact that people, able or willing to work in the economy, fall by the wayside because they give up hope and stop looking for a job. These people present a systematic risk, yet the headline remains - the economy runs at full capacity!
The same problem applies to the issue of market efficiency. Modern world economists and finance overlords claim that market participants hold full market information. Therefore, the theory makes believe that market participants can steer the markets in the right direction to price in prevailing market trends. In truth, information flows are asymmetrical, financiers are superficial, and everyday people are deprived from wealth growth opportunities because of regulators masquerading as saviors of their financial livelihoods.
To be clear, the above is not a critique to Kain, but a critique to the opaque practices that prevail in traditional markets. I believe the nature of blockchain technology can bring the world closer towards the market efficiency ideal. For that to happen, we may very well need to see a migration of traditional assets into a tokenized form. Blockchain infrastructure would need to meet certain regulatory requirements, such as data privacy (to which zk-roll-ups could be the answer).
With the risk of being philosophical, is any market really efficient?
It's a shame that semantics suffered a great deal over the centuries - from Adam Smith till present times. The way industry expert talk about, say full employment or market efficiency, and the way layman people perceive these terms is asymmetrical. An economist can skew public perception on the state of the economy, arguing that their country runs on full employment, all the while discounting the fact that people, able or willing to work in the economy, fall by the wayside because they give up hope and stop looking for a job. These people present a systematic risk, yet the headline remains - the economy runs at full capacity!
The same problem applies to the issue of market efficiency. Modern world economists and finance overlords claim that market participants hold full market information. Therefore, the theory makes believe that market participants can steer the markets in the right direction to price in prevailing market trends. In truth, information flows are asymmetrical, financiers are superficial, and everyday people are deprived from wealth growth opportunities because of regulators masquerading as saviors of their financial livelihoods.
To be clear, the above is not a critique to Kain, but a critique to the opaque practices that prevail in traditional markets. I believe the nature of blockchain technology can bring the world closer towards the market efficiency ideal. For that to happen, we may very well need to see a migration of traditional assets into a tokenized form. Blockchain infrastructure would need to meet certain regulatory requirements, such as data privacy (to which zk-roll-ups could be the answer).