Leverage, My Favorite Sin

At the end of the movie Devil's Advocate, Al Pacino, who plays Lucifer, has this amazing ending line: "Vanity, my favorite sin".

To give you a bit of context, Keanu Reeves, who plays a young aspiring lawyer, ends up selling his soul to Al Pacino, to get rich - sounds familiar, right?. He ends up losing everything, obviously, including his wife, but somehow he gets back on his feet, defeating Lucifer / Al Pacino for a while. Lucifer acknowledges defeat, but as Keanu starts to rest on his laurels, becoming a bit over-confident, Al Pacino sees a future opportunity. Vanity, my favorite sin. That's how the movie ends.

Human nature. Our biggest flaw. Greed and fear, the two main drivers of this world.

So, why do I bother you with quotes from movies on a Sunday, when the market is bleeding hard?

Well, I'm annoying you with this specifically because the market is bleeding hard.

And because this time really is different.

Bitcoin broke a previous ATH. Something that never happened before, in the last 11 years. The predictability of the entire Bitcoin cycle has been broken. Well, not broken, but seriously shaken.

You see, the reason Bitcoin shot so high during this bull run was leverage. There was no such thing during the 2017-2019 crypto winter. You could barely short Bitcoin back then, because there were almost no institutional players, and the infrastructure for that was inexistent.

But as deep pockets saw the opportunity, and as the market created mechanisms for feeding greed - for what else is leverage, if not the promise of horrendously big returns, for equally horrendously big risks? - the balance was shaken. People flocked to the chocolate fields, filling their bellies with the insatiable drug, asking for more, and more, and more. Even if that meant they put their lives as collateral.

"Of course I will put everything I have as collateral, if the return is 10x my everything". That sounds almost like Keanu Reeves in the movie above. Selling his soul to become rich.

Alas, what goes up, must go down.

On its way down, the pendulum slashed hard the greedy. And in the process gathered even more inertia, going deeper in the red territory. Lower than ever before.

We're heading to the fear land now. Oh, no, fear is an understatement. Pushed by the insatiable greed of leverage, we're going into full bankruptcy. We're going to the pain, to the torment, to the deep and incurable suffering. Lives will be lost. Like, literally. Livelihoods will be destroyed.

And it's not Bitcoin's fault. It's not government's fault either.

It's the human nature. It's the greed grasping hard the leverage magic, hoping for insane returns, while never truly assessing the risk.

The only good news is that the incredibly small percentage of survivors will be stronger than anyone else. Unbreakable. Unhackable.

Until then, I can almost hear Al Pacino in the back of my head: "Leverage, my favorite sin."