Eric Adams Pulls Crypto-Paycheck Stunt Hours Before Bitcoin Crash

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In November, New York City mayor Eric Adams found himself in what one might call a pissing contest with Miami mayor Francis Suarez, over who would accept more of his salary in cryptocurrency. “In New York we always go big, so I’m going to take my first THREE paychecks in Bitcoin when I become mayor,” Adams tweeted after Suarez stated that “100%” of his next check would be doled out in Bitcoin. “NYC is going to be the center of the cryptocurrency industry and other fast-growing, innovative industries! Just wait!” On Thursday, Adams, who was sworn in on New Year’s Day, informed New Yorkers that he had followed through with his commitment. “Promise made, promise kept. I took my first check in Bitcoin and Ethereum,” he said in a clip shared to Twitter.

Unfortunately for hizzoner, he chose a particularly bad time to put all of his eggs into the internet’s favorite speculative market. Hours after his announcement, both Bitcoin and Ethereum fell off a cliff, causing the mayor’s crypto check to lose about 10% of its value in the span of a single day. This latest crash, which resulted in a market loss of more than $205 billion, was partly triggered by the news that Russia’s central bank is weighing a nationwide ban on the use and mining of cryptocurrencies. Despite experiencing relative gains over the past two years, the crypto market has proven especially volatile of late. In September, the value of the world’s cryptocurrencies dropped roughly 9% after a Chinese crackdown.

As for New York’s chief crypto enthusiast, Adams isn’t exactly “taking his paychecks in Bitcoin.” Instead, the mayor said that he used Coinbase, a cryptocurrency exchange platform, to convert the funds from his check into Bitcoin and Ethereum. “Adams isn’t being ‘paid in Bitcoin’ any more than using his paycheck to buy Shake Shack equals being ‘paid in cheeseburgers,’” explained tech executive Anil Dash in a Thursday tweet.

While Adams has framed his paycheck publicity stunt as a way to showcase New York as “the center of cryptocurrency and other financial innovations,” his interest in crypto may also be related to his close relationship with crypto entrepreneur Brock Pierce, who reportedly gave Adams a ride to Puerto Rico—its own kind of crypto haven—on his private jet in November. (Adams had said he paid his own way.)

Adams isn’t the only U.S. politician to recently dive into the cryptoverse. A few weeks ago, Republican congressional candidate Josh Mandel listed his love of Bitcoin beside his commitment to the “Almighty God” and his family, while outlining the issues he represents. “Ohio must be a pro-God, pro-family, pro-bitcoin state. I promise we will be,” tweeted Mandel, who is running for a Senate seat in Ohio. In December, Florida governor Ron DeSantis announced he is exploring a program that would allow businesses to pay the state in cryptocurrency, stating, “Our view as the state government is this is something that we welcome and we want to make sure that the state government is crypto-friendly.”

Crypto Crash Panic Misses Bitcoin’s Billionaire Michael Saylor

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Despite millions of dollars in losses, this bitcoin evangelist has no intention of selling.

What crypto crash? While the rapid skid of crypto value has caused panic on social media and Wall Street, billionaire Michael Saylor seems to have kept his cool.

He won’t sell his bitcoin.

He doesn’t want his company MicroStrategy (MSTR) - Get MicroStrategy Incorporated Class A Report to let go of its almost $5 billion bitcoin pile, he told Bloomberg recently.

“Never. No. We’re not sellers,” he said. “We’re only acquiring and holding bitcoin, right? That’s our strategy.”

Michael Saylor, who has an estimated net worth of $1.7 billion, according to Forbes, doesn’t intend to ever change MicroStrategy’s multibillion-dollar bitcoin acquisition plan, despite a painful 46.8% slide in the cryptocurrency’s price since its all-time high on Nov. 10.

Bitcoin dropped 11% at $36,886.32 on Friday, and is now very far from its Nov. 10 all-time high of $69,044.77.

But Saylor, a bitcoin aficionado who bets big on the rise of the king of cryptocurrencies, explained on Twitter that he is in for the long term.

In late 2020, MicroStrategy became the first publicly traded company in the U.S to buy and hold bitcoin as part of its balance sheet. Since then, the business intelligence software maker has accumulated around 124,391 bitcoins worth about $4.58 billion at current prices, according to Bitcoin Treasuries.

Saylor, who believes that bitcoin will rebound, advises his followers not to panic. “Hodl don’t Trade,” he encouraged them on Jan. 15.

As bitcoins decline wiped out hundreds of millions of dollars on Jan. 18, he found solace in German literature.

The company’s stock has dropped 31% since the beginning of the year — suggesting Saylor may have chosen a risky strategy.

On Friday, MicroStrategy (MSTR) - Get MicroStrategy Incorporated Class A Report fell 17.84%.

3 Cryptocurrencies That Could Crash in 2022

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If you think the stock market has been kind to investors since the March 2020 bottom, take a gander at how handsomely cryptocurrency investors have been rewarded. As of the end of 2021, the aggregate value of all digital currencies had jumped more than 14-fold to about $2.2 trillion. That compares to gains of a little over 100% for the benchmark S&P 500 since the pandemic low.

Seemingly everything worked for crypto investors last year, including buying into blockchain projects that promoted decentralized applications, decentralized finance, and the metaverse. But one theme that worked outstandingly well in 2021 could find its way to the doghouse this year.

Below are three cryptocurrencies with a common theme that could crash in 2022.

Shiba Inu

The aforementioned theme to avoid this year is tokens inspired by the Shiba Inu dog breed. Not surprisingly, Shiba Inu (CRYPTO:SHIB) makes the list of cryptocurrencies that may crash in 2022.

To say that SHIB had an amazing 2021 would be an understatement. After beginning last year at $0.000000000073 per token, Shiba Inu finished with six fewer zeroes after its decimal point (about $0.000034). This equated to a gain of around 46,000,000%! It means an investment of a little over $2 at midnight to begin 2021 is all it would have taken to make an investor a millionaire.

Shiba Inu had a number of catalysts fueling these gains. For example, increased visibility helped grow the community beyond 1.1 million holders and improve liquidity. There was also the launch of decentralized exchange ShibaSwap in July. ShibaSwap is helping to improve liquidity and allows SHIB holders to stake their coins to earn passive income. Staking has been crucial to extending the average hold time of Shiba Inu coins.

I’d be remiss if I also didn’t mention the role that the fear of missing out (FOMO) has played. Shiba Inu is one of the most-discussed cryptocurrencies on social media. A large, hyped-up community has created a strong confirmation bias that SHIB will head significantly higher.

However, there’s plenty of evidence to suggest that Shiba Inu could head markedly lower throughout the year. For instance, online business directory Cryptwerk notes that only around 600 merchants accept SHIB as a form of payment. That’s a very small number considering there are more than 500 million entrepreneurs worldwide.

Equally worrisome, Shiba Inu lacks truly differentiating characteristics in a space with 16,000 listed cryptocurrencies (and growing). It’s an ERC-20 token built on the Ethereum blockchain, which means it struggles with the same high transaction fees that plague the popular Ethereum network. While the layer-2 Shibarium solution may alleviate some of these cost concerns, it’s difficult to see how a payment coin like Shiba Inu stands out amid a flurry of intriguing blockchain projects.

Lastly, history hasn’t been kind to payment coins after they hit their peak following life-altering short-term gains. My inclination is that SHIB will vastly underperform in 2022.

Floki Inu

A second highly popular cryptocurrency that could crash in 2022 is Floki Inu (CRYPTO:FLOKI). This coin is named after the Shiba Inu named Floki adopted by Tesla CEO Elon Musk last year.

Aside from the nostalgia and social media hype of being a Shiba Inu-themed coin, FLOKI’s allure in 2021 looked to be tied to its lofty white-paper aspirations. The white paper laid out three projects aiming to provide real differentiation in a crowded crypto marketplace. These projects include the formation of an education platform named Floki Inuversity, the development of a merchandise marketplace known as FlokiPlaces, and the creation of a non-fungible token (NFT) gaming metaverse known as Valhalla. Remember, anything having to do with the metaverse is extremely hot right now.

While this might all sound great on paper, achieving this lofty trio of goals won’t be easy. Nevertheless, it hasn’t stopped investors from giving FLOKI well over $1 billion in market value – a valuation that makes little sense given how much the project has to prove.

Arguably the biggest issue with Floki Inu is that there aren’t any tie-ins with Elon Musk. Although Musk’s brother, Kimbal Musk, is working on the Million Gardens movement with Floki Inu to address world hunger issues, the world’s richest person has no involvement in the project. Elon Musk is known to move cryptocurrencies with his tweets. On the other hand, Kimbal Musk doesn’t have that sort of influence. It would appear that some investors may be misinterpreting some of the hype surrounding Floki Inu.

The other clear concern is that there’s not a lot of real utility for FLOKI tokens. While the white paper does note a partnership with CryptoCart, which allows FLOKI to be accepted by 1,700 merchants, the actual number of merchants actively willing to accept FLOKI – and not have a third-party merchant site exchange FLOKI into a fiat currency of choice – is extremely small.

Until we see tangible advancements of these white-paper projects from the Floki Inu development team, it’s a token to avoid.

Dogecoin

The third Shiba Inu-inspired cryptocurrency that could crash in 2022 is Dogecoin (CRYPTO:DOGE).

Dogecoin has been predominantly lifted by two key catalysts. First, it has the full support of Elon Musk, who holds stakes in only three digital currencies, one of which is Dogecoin. The world’s richest person has also previously tweeted that he’s working with Dogecoin’s development team to roll out upgrades that would significantly reduce transaction fees. It certainly doesn’t hurt when one of the world’s leading innovators is in your corner.

The other catalyst for Dogecoin has been a handful of brand-name merchant wins. For instance, Tesla recently began accepting DOGE for select merchandise, and movie theater chain AMC Entertainment is on track to accept DOGE sometime before the end of March.

However, like SHIB and FLOKI, Dogecoin lacks the real-world utility and competitive edge that will be required to give it staying power in a rapidly growing and competitive space.

The most glaring concern is that Dogecoin’s transaction fees are markedly higher than most other popular payment coins. Additionally, Dogecoin’s blockchain network doesn’t process transactions all that quickly, nor can it be scaled up rapidly to handle a large influx of transactions.

For some context, data from BitInfoCharts.com shows that Dogecoin was averaging less than 20,000 daily transactions on its blockchain in September. Payment processor Visa can handle more than 20,000 transactions on its network in a single second.

To build on the theme of utility, Cryptwerk’s data shows that only around 2,000 merchants worldwide are willing to accept DOGE as payment. That’s a really small figure for a payment coin that’s been in existence for more than eight years.

Even though it’s retraced nearly 80% from its all-time high, look for Dogecoin to continue falling throughout 2022.

Can Extreme Leverage Crash the Crypto Market in 2022?

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Leverage can be both a good and a bad thing. In the Jan. 5 episode of “The Crypto Show” on Backstage Pass, Fool.com editor Eric Bleeker and contributor Chris MacDonald discuss how leverage could impact the outlook for major cryptocurrencies in 2022.

Eric Bleeker: Let’s begin with the leverage segment that Chris just alluded to. We have an article, “Leverage-Linked Liquidations Pummel Solana (CRYPTO:SOL), Polkadot (CRYPTO:DOT), and The Sandbox (CRYPTO:SAND) Today.”

What is behind this?

Well, we talk a lot about leverage, and this is a specific product that we’re looking at that is part of this leverage situation. And as you can see, this is from Bitfinex, it is a 100x max leverage ratio, so there’s a little screenshot of some of the numbers behind what we’re talking about.

Chris, let’s talk about this article. What are you seeing right now in the space and how is leverage driving recent price activity?

Chris MacDonald: It’s really interesting. Looking at the derivative side of the crypto world, in the stock market, a lot of the recent rallies, a lot of analysis has been done on options markets driving the stock price of something like a Tesla (NASDAQ:TSLA), for example, with call options forcing market-makers to buy shares and therefore driving up the price of certain stocks.

In the crypto world, there are derivatives products that may not be as well known by some retail investors. These products are intended to be used by institutional investors and traders and in order to use them, you need to be an accredited investor, so this doesn’t really necessarily fall under the purview of a lot of retail investors per se. But it is an interesting trend to look at with what’s driving volatility in the crypto market.

Diving into it a little bit – I’m still learning about this too because there are so many different variations of it – Bitfinex is one of the bigger players in this space, so looking at their 100x leveraged product, it’s a perpetual contract. Essentially, an investor can put up 1/100th of the capital that they would want to on a trade to try to catch the upside, for example, on a particular token. If they put up $100 let’s say, and the given token went up 1%, they would make $100 on that trade so you double your money on a 1% move.

On the downside, it goes the same way. Bitfinex has, for various contracts, they have different margin requirements but essentially if it drops by .5%, a forced liquidation is put in place. The article that I wrote was on forced liquidations driving volatility in those three tokens that were highlighted in that article.

Essentially, it’s interesting because this is one of the factors that’s been pointed to as creating volatility in the crypto market because if a .5% drop can force liquidations across all these contracts, that in turn basically results in further selling which drops the price even further. Some of the spikes that we’ve seen are driven partly by these contracts on the upside, but on the downside, it enhances volatility as well anytime you’ve got 100x leverage on something.

It’s just a really interesting tidbit to think about when you’re looking at the crypto market in terms of, why is crypto so volatile? That’s a question that a lot of people have and a lot of it it’s due to some of these contracts that are available right now.

Bleeker: You think about 100:1 leverage. I know you just put it into perspective but it’s truly an incredible amount of leverage. Even on the stodgiest financial products in the world, you can hardly imagine 100:1 leverage, let alone a place like crypto, so it’s almost hard to conceptualize this amount of leverage being offered, right?

MacDonald: Yeah, for sure. Again, thinking about how a half a percent move could liquidate your position, these things are obviously intended for sophisticated institutional investors looking to hedge a position or add some risk on to their portfolio.

When you talk about this in scale, it can really drive volatility, so that’s one of the things that maybe retail investors should think about a little bit in terms of what’s behind the scenes driving the stuff.

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