“Everything Except Bitcoin is a Scam”

We have interviewed Tone Vays, one of the most well-known traders and consultants of the Bitcoin space. He is a die-hard Bitcoin maximalist and has a very clear (and controversial) opinion about all other cryptoprojects.

SMART BITCOIN INVESTOR: The price of Bitcoin nearly doubled from September to December 2020*, why do you think did that happen?

* This interview was conducted on December 8th, 2020

TONE VAYS: Bitcoin has been in a bear market for more than two years, so it was just Bitcoin’s time to go up. We saw a lot of corporate interest in Bitcoin, and that is a huge driver. Companies like Microstrategy are buying so much Bitcoin, taking it off the market, and when people read about this, they feel that they are missing out. So the fact that big companies are getting into Bitcoin drives the retail confidence.

Andreas Antonopoulos said that the fact that big companies getting into Bitcoin can be dangerous, as they do not understand what Bitcoin is all about and they might want it to be regulated by governments. How do you see that?

Yes, many of those companies don’t care about the anarcho-capitalist nature of Bitcoin and that is was created to separate state and money. Private corporate interest in Bitcoin does not scare me, what does scare me is banking custodians storing Bitcoin. Fidelity, Greyscale, GBTC, these are financially regulated institutions which are holding Bitcoin on people’s behalf. Those Bitcoins actually belong to the governments, not to the people. It is like the dollars on my bank account – they don’t really belong to me, not even to the bank, they belong to the state. It worries me if a large amount of Bitcoin is stored by institutions regulated by the government. If they own a large enough supply, that could endanger Bitcoin.

What is your outlook on 2021?

I think 2021 will be a very good year for Bitcoin. One possibility is that we will see a rallye up to 25,000 before Christmas (this interview took place on December 8th, and the rallye predicted by Tone happened indeed), then we have a significant correction of about 30%, and from there another rallye up to a peak of 45,000.

Tone Vays expects 2021 to be a good year for Bitcoin

Another possibility is that we consolidate over the next three months in the region of 15 – 18,000 dollar and from there rise more slowly up to 45,000. Some of my friends who I respect are more bullish and expect a price of 100,000 dollars, which is possible, but I would be happy with a peak of 45,000 with a pull-back in the area of 30,000 by the end of the year.

We had a Bitcoin halving in May 2020, and about one year after each of the last two halvings in 2012 and 2016 we saw huge bull runs. Do you see a causality there, or was it just a coincidence?

It‘s not exactly a coincidence, as a halving is a very important event in Bitcoin. It not only cuts the future supply of Bitcoin in half, it also generates a lot of hype. There is no such thing as a single catalyst, but the hype surrounding the halving is creating more attention for Bitcoin. More people google about what the halving means, and then they learn why the supply of Bitcoin is so limited. This hype drives people into Bitcoin, so it is a self-fulfilling prophesy. Bitcoin owners tend to not sell their Bitcoin, as they expect the price to go up, and when that happens, it reinforces even more interest in Bitcoin.

One of the biggest hypes of 2020 was DeFi, but more than 90% took place on Ethereum. What is your view as a Bitcoin maximalist on the new trend of DeFi on Bitcoin?

In my opinion, everything in crypto except Bitcoin is a scam, including Ethereum. It is a platform that encourages bad behavior. A lot of people own Ether and there is really no use for it other than investing it in pumps and dumps. A lof of these DeFi people would not want to launch on Bitcoin because it is very difficult to separate Bitcoiners from their Bitcoins for these pump and dump scams. It is a lot easier to separate Ethereum people from their Ether, because when you are invested in Ethereum you probably don‘t understand the reason for Bitcoin’s existence, and the only reason you are in this space is to make money. That describes 99% of the DeFi space on top of Ethereum. Maybe one in a hundred DeFi projects may be legitimate.

The way I understand it is that in the same way Bitcoin has decentralized cash and payments, DeFi is decentralizing all aspects of finance such as lending, borrowing and trading. Isn’t that a logical step forward?

The problem is that A) none of the current DeFi projects are really innovative, as everything they are doing has already been done in the current financial system, and B) none of these projects are decentralized at all. They have the exact same centralization as the traditional banking system. They just pretend to be decentralized, and that is even worse. When things go bad and your platform gets hacked, either you prove that you are in reality centralized, or your users lose all of their money.

Bitcoin is a truly decentralized project, and this is spread out through three branches of decentralization: coding, mining and running your own node to validate and keep all the coders and the miners in check. None of these three factors exist in the current DeFi projects. They have a single coding team, there is no mining whatsoever, and no one is running their own node to process the transactions. So if the developer makes a mistake and the contract gets hacked – well, I would not even call it “hacked” … it may just be a guy with better coding skills, who can read the code and abuses it to get the money.

This interview was conducted by Aaron Koenig via Zoom on December 8, 2020

The worst for me is the so called “Yield farming”, that is just an outright scam. You create a project, you make up a reason for its existence and you try to distribute your token to as many people as possible. You just give away free money by creating your own tokens, and make people lock up their Ether for it. You pay influencers to write or talk about your token to create a hype, and you can always print more money and give it away, but you can keep half of it. This is why these projects have a very short life span, because they are just pump and dump schemes.

What is your opinion on Bitcoin Second Layer solutions such as RSK?

Honestly, I haven’t paid attention to them in the last few years. I know RSK is building an Ethereum style solution for smart contracts on top of Bitcoin. There are two other projects very similar to RSK, which are Liquid and RGB, but I haven’t looked into them in detail yet, because they are not that important to me.

One of the conferences I organize, Understanding Bitcoin on Malta, was supposed to have a focus on the Liquid sidechain. I don’t really know much about it, so I wanted to organize this conference in order to educate myself. Maybe I could have even created my own Tone token on that sidechain (laughs) but unfortunately we had to cancel the conference due to Covid.

No worries, we will constantly report on all these Second Layer projects and keep you updated. Thank you very much for this interview!

Tone Vays has worked on Wall Street for almost 10 years as a risk analyst at Bear Stearns and as a VP at JP Morgan Chase. His expertise is in economic trends, trading and risk analysis. He has been active in educating people about Bitcoin since 2013. More info on him at tonevays.com.