Crypto's Greed Blindness Why Iran-Israel Crisis Could Wipe You Out

So that’s why it was a delight to see Sarah last weekend at the farmer’s market, looking positively radiant. She poured her life savings and almost all of her nascent small-business start-up loan into Bitcoin. She thought it would be her ticket to an early retirement. It’s a digital gold, you see?” she explained to me, eyes aglow, repeating the line of every dynamic crypto influencer that my daughter’s TikTok feed is full of. That picture is etched into my memory. Sarah, as with most, is a pawn to the global chess match, dodging landmines and artillery strikes, all while playing ignorant to the unfortunate fatality that may come knocking.

Even as missiles reportedly exchange between Iran and Israel, the Crypto Fear & Greed Index is currently flashing “greed.” With Bitcoin up, now embedded interests are trying to convince you that Bitcoin is a safe haven. Safe haven? Really? Let's be honest. The only thing “safe” about crypto these days is the federally guaranteed commissions that brokers are currently raking in. It’s much more than just investing wisely. It’s fueled by herd mentality, FOMO and a dangerous dose of confirmation bias. Individuals such as Sarah are only tuning into conversations that support what they already believe, bypassing all of the bright red flags.

Here's a truth nobody wants to hear: the crypto market is built on leverage. More than one and a half billion dollars in longs will be liquidated if Bitcoin drops below $100,000. That’s an awful lot of Sara’s life savings going up in smoke. Imagine a stack of dominoes. One drops and sets off the next and the next. The same goes for all leveraged crypto positions. As with any highly leveraged position, a steep decline can set off margin calls and compelled liquidations. This chain reaction further lowers prices, thus producing a death spiral. And it's not just Bitcoin. Ether underperformance is beginning to set in. Whereas Bitcoin ETFs are enjoying inflows, Ether ETFs are suffering outflows. It’s a bit like watching an oncoming train wreck in slow motion. Unfortunately, there is no shortage of passengers tied down to the front of that engine.

Remember 2008? Next, the housing market was “too big to fail”, until the housing market failed. Remember the dot-com bubble? Now, everyone was sure that internet stocks could never stop going up. History is replete with examples of this kind of irrational exuberance crashing down in disaster. The Iranian-Israeli conflict, if it happens, is the classic black swan event – the totally unpredictable event that is going to have a huge impact. To think that Bitcoin can somehow be insulated from geopolitical shocks is not just naive, but downright reckless.

When the crypto bubble bursts – and it will, eventually – it won't just be wealthy investors who get burned. It will be Americans like Sarah, who bet the farm on an entrepreneurial gambit for cash independence. And it will be the small businesses who took crypto payments and wake up one day to find themselves holding worthless assets. And who will profit? The same Wall Street firms that drove the hyperbole through the roof, making themselves rich while Main Street cringes.

It’s time to demand tougher enforcement and regulation in the crypto space. We’re out to protect investors from scams and scammers, not to stop innovation in its tracks. We need to learn the risks of leverage and the peril of herd mentality. We ought to be strategic about how we can better diversify our investments, therefore not putting all our eggs in one volatile basket.

Don’t let the siren song of greed seduce you into ignoring the very real dangers presented by the still wild west crypto market. The Iranian-Israeli crisis is a sobering example of how quickly the world can become unstable. Even the most “relentless” asset can be vulnerable in such arbitrary and uncertain times. Be cautious. Be informed. Be prepared. For Sarah's sake, and for the sake of our community, let's hope this bubble doesn't burst before it's too late.

What can History teach us?

Main Street's Pain, Wall Street's Gain

When the crypto bubble bursts – and it will, eventually – it won't just be wealthy investors who get burned. It will be people like Sarah, who risked everything on a dream of financial freedom. It will be small businesses that accepted crypto as payment and suddenly find themselves holding worthless assets. And who will profit? The same Wall Street firms that fueled the hype, lining their pockets while Main Street suffers.

Time to wake up and regulate

We need to demand greater regulation of the crypto market, not to stifle innovation, but to protect vulnerable investors from predatory practices. We need to educate ourselves about the risks of leverage and the dangers of herd mentality. We need to diversify our investments and avoid putting all our eggs in one volatile basket.

Your Next Move Matters

Don't let greed blind you to the very real risks of the crypto market. The Iranian-Israeli crisis is a stark reminder that the world is a volatile place, and even the most "relentless" asset can be vulnerable. Be cautious. Be informed. Be prepared. And for Sarah's sake, and for the sake of our community, let's hope this bubble doesn't burst before it's too late.