Brief History of the birth of mainstream markets
It has been the crypto worlds stance they are are nothing at all like the old, traditional institutions and the markets they dominate. They fancy themselves as mavericks, rebels who buck the system at every turn doing their own thing. Blazing a new trail through uncharted territory similar to what the pioneers and cowboys did in the old wild west. Not so anymore there are just too many similarities we cannot ignore making crypto street a mini-me version of wall street. Ok, before I delve into that blasphemous statement a short financial history lesson is called for.
You may, or may not be surprised to learn that traditional exchanges, as we know them today, owe their existence to early entrepreneurs in the 1300's. From the powerful Merchants of Venice to the small time money lenders plying their trade in local taverns, coffee shops, tea houses, town squares, or at any number of their favorite haunts traded commercial instruments (paper) for many centuries now.
At first trading was primarily between money lenders, banks and wealthy merchants dominated this scene. Of course like all things people of rank and privilege, wealthy land owners, those living off inheritances (trusts), prominent political figures began clamoring for these financial instruments. As per the times contracts on stone then wooden tablets, papyrus, cloth, and the like had been in use centuries before any exchange ever existed. Handshakes and a person's word were non-tangible, yet no less binding than any physical instruments were, and are. Exchanges were an inevitable step in the progression of business, banking, finance and their ability to cohesively bring it all together for the benefit of all parties.
1531 saw the very first organized and operational exchange open for business in Antwerp, Belgium, which traded primarily promissory notes, bonds and other debt instruments. Thus, the seeds for modern day trading were planted opening up a myriad of new ways to create trade and wealth. Not far behind at the beginning of the 1600's the Dutch, French and British were presented East India charters to companies securing, procuring and transporting vital resources. Also included were highly desired luxury goods from the East Indies and Asia for consumption in Europe. Of course the transporting of said goods was very risky since the trade routes were made perilous due to mother nature, pirates and, yes, mutinies. Some of today's equivalent perils for the crypto world would by scam devs, hackers and a government clamp down. A ship owner could increase his profits, reduce costs and limit his losses due misfortune by issuing limited partnerships.
The East India companies fined tuned this even more by selling limited partnerships bundling all of their voyages together. Again distributing the immense gains and spreading the liability (potential losses) among the partners under one umbrella deal. Actual paper instruments (shares) were issued for the first time in history to investors.
This proved to be so successful other merchants and business owners began to create limited partnerships, offering a share in the profits by way of issuing dividends and mutual liability. Of course this led to rampant abuse where even local farmers would create limited partnerships on just several wagon loads of produce, or livestock then issue shares. They baited prospective investors with outrageous claims of the size, contents, quality of said shipments accompanied by inflated rates of return.
The creation of scams began in earnest, as you can see, scammers effectively utilized the pump-n-dump, churn-n-burn, sandbagging techniques so prevalent in today's crypto world. It is sad that the unscrupulous are taking advantage of the gullible, unsuspecting greenhorn investors. But let us not forget to mention the next wannabe John Templeton, Benjamin Graham, Michael Steinhardt, Warren Buffett, Peter Lynch, Philip Fisher, George Soros, Bill Gross populating the numerous exchanges cropping up throughout the world today. Proving what applied eons ago still applies to today, that age old saying "a fool and his money are soon parted".
Scammers with their scheming became widespread and audacious in their blatant fabrications such as issuing shares for non-existent goods thus creating ghost deals just to swindle unsuspecting investors. These shares would be rapidly re-sold multiple times on the same day and the perpetrators would vanish just as quickly. The inevitable happened the respective governments that allowed these instruments to be traded spearheaded by Britain declared it illegal to do so, whether legitimate, or not until 1825. This mirrors the crypto world fears that governments globally will step in and things will never be the same.
Continuing part two (Two Peas of a Pod) of this article next week..........