By JR Valrey
With the inventions and growing popularity of cash app, paypal, venmo, zelle, and others the days of cash money and coins is numbered. With the US dollar plummeting from international prominence recently, with financial juggernauts like China, India, Turkey, Iran, and Russia, divesting and effectively ending the dollar monopoly, Black people in the U.S. specifically, have a chance to beat the masses to the punch of crypto-currency before the imminent death of the dollar. I recently got into crypto, because I see the writing on the wall of an upcoming financial apocalypse, and as a world citizen, I need to protect my “twos and fews” so that my family could up, and buy some land somewhere else on this lush planet, when the time and opportunities present themselves. If you fail to prepare for the future, you are preparing to fail, because success takes vision, ambition, and risk.
I am new to the crypto-currency world, so I’m constantly reading articles and watching documentaries so that my knowledge base can increase, as fast as possible. One of the best things that I did was hire a crypto advisor, who has already taught me about the different crypto-currencies, buying, selling, trading, centralized finances vs. decentralized finances, smart contracts, and more. I still have a lot to learn, but being a student is easier, when you have a teacher with more experience. Jeriel Bey, is an Oakland resident, and the owner of De-Centralized Entertainment. He has been my guiding light, into this new budding financial world, and I would like for you to sample a little bit of this man’s knowledge and wisdom on finance and crypto-currency, and if you want to go further, contact him and set up an appointment.
JR Valrey: Can you explain the recent controversy with the Robinhood app and the GameStop stock?
Jeriel Bey: Robinhood’s actions were done purposely and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood’s customers,”. Like many companies that are in rough shape, GameStop was the subject of what’s called short selling, in which professional investors borrow shares of stock to sell and then buy back later so they can return them, which lets them pocket the profit if the stock price goes down. They’re basically bets that the company will fail.
JR Valrey: How did the little investors start winning?
Jeriel Bey: The little investors start winning because they were able to to get in the trades with no fees through the app.
JR Valrey: What was the response?
Jeriel Bey: The response angry users have filed class-action lawsuits against the app for allegedly manipulating the market by restricting retail investors from buying GameStop and other stocks. In this case, there were a lot of hedge funds that were actually shorting companies like GameStop. When you go short, you’re essentially betting that this company is going to go down and hoping that the company will probably go to zero or even bankrupt. And that’s how they actually make money.
In order to actually short a company, you have to borrow shares and then sell those shares to someone else in order to make a profit. So, they would call their prime broker and say, “I want to borrow shares of GameStop, and sell it to someone else.”
For example, let’s say GameStop is trading at $15. They would then go to their prime broker and say, “let me borrow these shares at $15. And I’m going to sell it to someone else.” And the idea is, later on, if/when the stock goes down, they would buy it back for $5, and therefore earn $10 as a return of that difference.
So anytime a hedge fund is actually shorting a company, they’re borrowing shares and selling them to someone else with the hopes that the stock goes down. They then profit as they buy it back to actually return the shares to the people they borrowed. But, in this particular instance, GameStop stock just kept rising. As a result, they would have had to cover their short, meaning they would literally have had to go buy it back because the person they borrowed it from is going to require more margin. For example, it’s literally like when you say, “you owe me like $10 million.” But because this stock is actually going the other way, you might have to post more collateral, which means you’ll actually owe $20 million or $30 million.
JR Valrey: If hedge funds and brokers can do this, why can’t regular people do it, too? Does Wall Street play by its own set of rules?
Jeriel Bey: The reason they were losing billions of dollars is that the stock was going up and they had to go out and purchase the shares that they borrowed at a much higher rate.
As a result, one company by the name of Melvin Capital needed to be bailed out. A much larger hedge fund by the name of Citadel bailed them out. Citadel is the company that Robinhood actually sells its users’ information and data (aka your “trade flow”) to. So Citadel is one of Robinhood’s largest clients. So, effectively to these hedge funds, their biggest enemy was the Reddit traders, who were using Robinhood.
This situation escalated last Thursday when traders on Reddit were not allowed to buy GameStop stocks. They were only allowed to sell it, which made them feel as though Robinhood was siding with the hedge funds. It seemed as though they were protecting Citadel and Melbourne Capital. It seemed as though Robinhood was effectively tying the hands of the small guys to protect the hedge funds. People were very upset with Robinhood because it appeared that they were manipulating the market.
JR Valrey: What would have happened if Robinhood decided not to react to the GameStop stock surge?
Jeriel Bey: The public’s perception is that Robinhood manipulated the market and transferred the wealth of power back to the hedge funds just as the smaller guy was winning. However, had Robinhood not taken action, the company may have gone out of business. They would have had to post a lot more capital in order to facilitate these orders. The Robinhood fiasco is a symptom of capitalism, which is a system that has historically benefited the top 1% as well as wealthy white people while exploiting working-class people of color. Is there a way to fix capitalism and make it work for both Main Street and Wall Street?
That depends. In order to close the racial wealth gap is through information. I think information education is the true equalizer over the long course. And it’s nearly impossible for people of color to gain more capital and acquire a higher net worth if we don’t own assets. Even if you make a lot of money, if you don’t own assets, if you’re not participating in the appreciation of assets, then you’re not going to benefit.
Black people need to own stocks. Black people currently own less than 1% of the stock market. So, to your question, is there a way that we can make this, you know, where, you know, black people, people of color, are able to effectively benefit in a capitalist society? We just have to actually own assets.
Have there been things in the past that have made us less inclined to own assets? Absolutely, whether it’s a distrust in the banking system or a lack of resources that would help us start investing.
One thing that I do with my brand Maconomics is bring Wall Street to Main Street by helping everyday people understand how to truly build generational wealth, which is why it’s important to invest. (https://www.blackenterprise.com/the-robinhood-and-gamestop-stock-saga-explained-by-former-wall-street-professional-ross-mac/)
JR Valrey: What is the difference between centralized finance and decentralized finance?
Jeriel Bey: What differentiates the two is how they do it. In centralized finance, the asset class and processes are managed by people or companies. In decentralized finance, they’re managed by a set of smart protocols. Centralized finance is a type of financial practice within the cryptocurrency sphere where users can earn interest and get loans on their digital assets such as Bitcoin, Ethereum, USD Coins like USDT and USDC, and so on, through a centralized platform. The platform can be managed by a person, a group of people, and usually within the jurisdiction of a financial technology (fintech) company.
In centralized finance, the assets and services offered are managed by people, and users need to come to terms with that. It’s about trusting the people or organization behind the platform. Also, Ceci platforms like Hodlnaut are custodial, which means we take user deposits and manage the accrual and payment of interests.
JR Valrey: How do banks steal from people?
Jeriel Bey: Well, if by stealing you mean creating billions of dollars out of thin air and lending it to us and cashing it back with interest while destroying the money created from thin air but keeping the interest on your payments, then yes banks steal your money. Also, banks now have the power to charge large fines like National Bank which can charge 48$ for each failed transaction you tried to do with PayPal or any other method of payment that takes the money from your bank account while there is no fund in it. When that happens, the bank rejects the transaction, nobody gets paid, but you have to pay the bank or abandon your goddamn bank account because some bank won’t let you terminate your account if your balance is negative. So yeah, those are some of the lesser ways banks do steal your money.
JR Valrey: What made you start investing in decentralized digital currency versus stocks and bonds?
Jeriel Bey: What made me start investing in decentralized digital currency versus stocks and bonds was how decentralized digital currency was introduced to me. My parents never taught me about financial literacy. It took an old lady, in a 45 min Uber Ride, who taught me about crypto, and how if I learned the technology I could make a lot of money in it, but I had to study each function of the coin or token to know what was real invested thought into a project or if it was just a shit coin.
JR Valrey: Do you think that the American dollar is losing its power?
Jeriel Bey: I think that the American dollar is losing its power and It has not had any “real” power since 1933 when President Roosevelt called for an executive order that required all gold and gold certificates to be surrendered to the federal government by May 1, 1933. House Joint Resolution 192 was then passed by Congress on June 5, 1933. This law was passed to do away with the gold clause in the constitution and in all public and private contracts.
JR Valrey: What happens when the bottom falls out of it for people that have their money in banks?
Jeriel Bey: What happens when the bottom falls out to the people who have their money in banks is what you think, they can’t get it out. Banks get your money, then loan it out. They print up as much as they want and tax you the voluntary taxpayer every year
JR Valrey: What is Bitcoin?
However, unlike with traditional (fiat) currencies where payments are controlled by central banks, Bitcoin puts you in full control of your own money.
This means you can send, receive, and store any amount of money without relying on financial intermediaries, making bank fees, identity fraud, and delays a thing of the past.
JR Valrey: Can you talk about how much it cost when it came out versus how much Bitcoin costs now?
Jeriel Bey: The cost of Bitcoin when I became aware of it was $800 a coin and at that time $800 was a lot for me but, in retrospect it really wasn’t if I looked at it as a way to pool people together. The value of Bitcoin, is derived from the total value of the Bitcoin used for storage of wealth (SW) plus the total amount of the Bitcoin required for concurrently transacting in it (TX). Bitcoin offers an efficient means of transferring money over the internet and is controlled by a decentralized network with a transparent set of rules, thus presenting an alternative to central bank-controlled fiat money. There has been a lot of talk about how to price Bitcoin and we set out here to explore what the cryptocurrency’s price might look like in the event it achieves further widespread adoption. First, however, it is useful to back up a step. Bitcoin and other digital currencies have been touted as alternatives to fiat money.
JR Valrey: But what gives any type of currency value?
Jeriel Bey: What gives any type of currency value is: The value of a currency is determined by its selling and purchase price as a commodity. This is affected by the amount of currency that is bought. When a currency is very popular and many people buy it, then its value increases. However, when a currency is not purchased often, then its value decreases.
JR Valrey: Can you talk about this recent run on Dogecoin?
Jeriel Bey: Dogecoin is a cryptocurrency which was launched in 2013. Originally invented as a joke by software engineers Jackson Palmer and Billy Markus, the Dogecoin has the image of a Shuba Inu dog as its logo. It has been marketed as the “fun” version of bitcoin.
Two weeks after its launch, the value jumped 300% after China banned banks from investing in cryptocurrencies, according to Investopedia.
Dogecoin then skyrocketed alongside other cryptos during the bubble that peaked in 2017, and it fell with the rest of them over 2018. At its height, Dogecoin was trading for $0.018 per coin, according to crypto data firm CoinMarketCap. What made this coin go up in value recently?
JR Valrey: Why is the value of it going up now?
Jeriel Bey: At its height on Friday (January 29), Dogecoin was trading for $0.075 (5.5p) per coin, according to crypto data firm CoinMarketCap. It jumped by a staggering 972% from $0.007 (less than 1p) the day before. Later on Friday, it started falling which continued into the weekend and then on Sunday it started going up again.
At the time of writing today (Monday, February 1), Dogecoin is trading at $0.039 (2.8p), up by 41% over the last 24 hours but still below Friday’s high.
The turbulence comes off the back of a bunch of Reddit threads calling for it to hit a value of $1 per coin.The target was an attempt to mirror the recent share surge in heavily shorted companies like GameStop.
JR Valrey: Can you talk a little bit about the history of Ethereum?
Jeriel Bey: Ethereum is a decentralized, open-source blockchain featuring smart contract functionality. Ether (ETH) is the native cryptocurrency of the platform. It is the second-largest cryptocurrency by market capitalization, after Bitcoin This cryptocurrency is smart money it is a programmable currency. Compared to bitcoin. Ethereum is the most actively used blockchain. Ethereum was proposed in 2013 by programmer Vitalik Buterin. Development was crowdfunded in 2014, and the network went live on 30 July 2015, with 72 million coins pre-mined.
JR Valrey: How is it different from Bitcoin?
Jeriel Bey: How it is different from Bitcoin is that Ethereum is programmable and Bitcoin is not. It was originally used just for transactions. Right now we are evolving to Eth 2.0. The main purpose of the upgrade is to increase transaction throughput for the network from the current of about 15 transactions per second to up to tens of thousands of transactions per second.
JR Valrey: Where is its value derived from? What gives Ether value?
Jeriel Bey: Let’s start by exploring why Ether is valuable. Ether, the native currency of the Ethereum network, derives its value from a myriad of different factors. It is used within the Ethereum network to perform a range of functions, including:
- used to pay Ethereum transaction fees (in the form of ‘gas’)
- used as collateral for a wide range of open finance applications (MakerDAO, Compound)
- can be lent or borrowed (Dharma)
- accepted as payment at certain retailers and service providers
- used as a medium of exchange to purchase Ethereum-based tokens (via ICOs or exchanges), crypto-collectibles, in-game items, and other non-fungible tokens (NFTs)
- earned as a reward for completing bounties (Gitcoin, Bounties Network)
Furthermore, in Ethereum 2.0 (Serenity), users will be able to become a validator and help secure the network by providing computational resources and locking up 32 Ether per validator. Due to this, it is expected that Proof of Stake will lock a substantial amount of the circulating supply of Ether. There are also discussions around introducing a ‘fee-burn’ model where a percentage of Ether used to pay transaction fees would be ‘burned’ and thus reduce the circulating supply of Ether.
In addition to utility value, Ether also has speculative value. This is a value that is derived from speculative activities (such as trading and investing) which currently accounts for most of the value behind all crypto-assets. As observed in 2017, crypto-assets can attract substantial speculative interest, with some assets increasing in value by 1000x over just a few months. This speculative interest often brings fresh capital into the ecosystem that can be reinvested into various verticals, but it can be damaging to the short-term market sentiment of all crypto-assets.
JR Valrey: Can you talk about your digital currency coaching services?
Jeriel Bey: Some of the digital currency coaching services I offer is: Consulting/ Blockchain Basics education which includes: What are Cryptocurrency Wallets/ How to purchase cryptocurrency/ What are exchanges/ and basic security questions for newbies to the cryptocurrency space.
Jeriel Bey: Why do so many people believe that a volatile investment in Bitcoin is a good one? Many people believe that a volatile investment in Bitcoin is a good one because it pays more than just having a regular banking savings account just to keep it short.
JR Valrey: How do people get in touch with you?
Jeriel Bey: How people can get in touch with me is by email: DecentralizedEntertainmentllc@gmail.com