Mpemba Effect

The Mpemba effect is a catch-all term for possible cases in which hot water appears to freeze faster than cold water. The phenomenon is temperature-dependent. There is disagreement about the parameters required to produce the effect and about its theoretical basis.

I was first introduced to this concept recently while watching a very silly show called Scorpion. I still have to do a post on that hilarious dumpster-fire so I'll leave it at that.

What I will say is: this is a clear form of scientific irony.

No one would ever expect boiling water to freeze faster than ice water. That makes zero logical sense. And even though there are a lot of disagreements about this effect, just the fact that the concept exists is honestly pretty weird.

There are lots of strange happenstances in the field of science that catch us by surprise. Many discoveries are uncovered purely by accident or random chance. Classic case of evolution hard at work. Sometimes the stars align and life gains another tool.

How does this apply to crypto?

First off let's take a look at my Twitter feed:

Must be hard to see with salt in your eyes.

The jealousy is in full effect. Are you jealous when someone goes to a casino and wins the jackpot on a slot-machine? That literally happens every day of the week. Aren't you so sour? No? Why not? Look how much money they just made and you didn't.

Yeah of course not.

Users in crypto (defi specifically at the moment) are gambling their asses off, and the ones who strike it lucky fill the hearts of everyone else with greed and jealously. Seriously, get over it: it's such a bad look. You're annoyed that people are jumping into the riskiest assets, ignoring everyone that gets rugpulled, and then telling yourself "That should have been me!" Really? REALLY? Stop. Go find someone that got rugpulled if you need to feel better about yourself.

VOLATILE!

The Mpemba Effect is extremely relevant to the cryptoverse. Volatility breeds volatility, but somehow even most users inside the space haven't figured this out yet. We foolishly assume that high token valuations (especially in Bitcoin) mean that there is "no way" the price could crash very far.

In reality the exact opposite is true.

The crazier this bull market gets the harder it will crash. That's what a mega-bubble is. It floats higher and higher with nothing below to support it. No matter how high Bitcoin goes I predict it will crash to $50k at the end of 2022. It's going to be a rude awakening for a lot of people.

Can you imagine it?

Getting financial advice from the friends and family you've been telling to enter the market for the last three goddamn years? lol.

Remember, it's you that needs to protect them when this market gets out of control. If Bitcoin hits my $250k-$400k target at the end of the year I'm going to make sure to tell everyone to stay out of the market for a full year. The less people that get wrecked this next time around the better.

We need better retention, and it looks like we're going to get it if we can mitigate these losses and stop people from ragequitting crypto during the bear market. The number of 'Normies' taking interest this time around is exponentially higher than 2017, and that number will skyrocket exponentially when the bubble is about to pop.

When sharks smell blood, they strike.

It is incredibly naïve to assume that institutions aren't going to turn bearish on this market the second the iron turns hot. Have you heard what everyone is saying? Bitcoin won't crash like it did last time in 2022. The corporations are going to prop up the market!

lol, no... please stop.

The sharks?!? We think that THE SHARKS are going to save us? Holy hell, if anything they are going to make the crash even worse. They know exactly what they are doing and will turn bearish and short Bitcoin the second it suits them.

Corporations are only dipping a toe into Bitcoin right now. We have one single tech company: Tesla. Where is Microsoft, Apple, Facebook, Netflix, Amazon, etc, etc, etc? We might not even pick up the big tech companies until the next mega-bubble in 2025.

On top of how little exposure corporations currently have, the market gets overheated insanely easily. Plain and simple: Bitcoin STILL doesn't have enough liquidity for these guys to enter the market. Try as they might, the price will spike higher and higher until the end of then year... and then... boom... game over for another 12 months. Just like 2013. Just like 2017. Just like 2021.

Every four years like clockwork. We couldn't ask for a more predictable market on the macro level. And yet most will be totally blinded by the euphoric FOMO and winner's tilt that the mega-bubble provides. "I'm up so much money, why not just let it ride and keep gambling 100%!?!" Friends and family want financial advice? Sure come on in the water is lovely. Everything proceeds to crash 80%-99%: Ouch. How many just put their houses up for collateral and lost it?

Speaking of the macro economics of Bitcoin, if the doubling curve is still in play by 2025, the mega bubble of that year should take us to at least $4,000,000 per BTC. How's that for a bubble? That's when you know they'll be measuring everything in sats instead of BTC.

Conclusion

Again, Mpembea Effect, the hotter Bitcoin gets the faster it's going to freeze. This naïve concept that institutions are going to eat the losses of a devastating bear market is totally ridiculous. Institutions do what institutions do best: hedge their bets. They are hedging now by entering the market, and they will hedge again when the bear market hits. They'll take gains. They'll short the market. This is a guaranteed fact. They are not the saviors of price action. They are the sharks. Count on it.

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