$Melania, Crypto, Upzoning, And The Greater Fool

I like to think that I have lived long enough to spot fads that make little sense and yet are popular. People are often not very rational, and often markets are wrong.

Now, sometimes the opposite is true – when something is dismissed as a fad, but actually represents a major change or is being underestimated. I love the classic James Bond film Goldfinger, and Sean Connery is wonderful in it and one of my favourite actors, but he says one line typical of the generational split that was developing in the 1960s:

“My dear girl, there are some things that just aren’t done, such as drinking Dom Perignon ‘fifty-three above a temperature of thirty-eight degrees Fahrenheit. That’s as bad as listening to the Beatles without ear-muffs.”

In 1964, both the Beatles and Bond were hugely successful, and might have been dismissed as fads, yet both had exceptional staying power and are still popular 61 years later. Who could have predicted?

Blockchain has been described as a major technological advancement, though many people do not understand it, and it has the hallmarks of a fad. It is really just a means of keeping a ledger on the internet that is supposedly tamper proof. Out of blockchain has come cryptocurrencies and NFTs (non fungible tokens).

In January 2025, around the date of her husband Donald Trump’s inauguration, Melania Trump launched her own cryptocurrency, $Melania coins. Donald already had his own $Trump. At the time, it was reported that according to the CoinMarketCap website, $Trump had a total market valuation of about $12 billion, while $Melania had a market capitalization at around $1.7 billion.

The $Melania coin peaked at over $13.00 USD, and is now around $1.23 USD. I have no idea why anybody would buy these, but the “market capitalization” is in the hundreds of millions of dollars, or even over $1 billion. Other than being a way to just give money to the Trumps, as a bribe or somethings else, it is hard to know what the real purpose or use $Melania has. In the 1970s, there was the Pet Rock fad. Essentially it was a pebble in cardboard box that sold for about $4.00. It had novelty or joke value, but at least you got a rock out of it. With $Melania, at best it is a number on screen.

Bitcoin is the main cryptocurrency of course. I really do not know what practical value it has for average people. A marijuana store down Queen Street, a block from my home, has an LED sign in the window advertising Bitcoin… I have no idea if they buy it or just sell it. Bitcoin likely has some use for criminals or people trying to skirt the law across borders or long distances.

Bitcoin has risen in value tremendously – a few years ago it was under $30,000, and it was over $100,000 a month or so back, but is now around $96,000. It is hardly stable from day to day.

In 2021, El Salvador became the first country to officially adapt Bitcoin, but now this is being reversed. One news story says:

“Shopkeepers are no longer obliged to accept Bitcoin alongside the US dollar; instead, businesses can now choose whether to embrace digital coins or stick to traditional currency. This voluntary approach marks a stark departure from the government’s initial enthusiasm for widespread Bitcoin adoption… it has lost its designation as a ‘currency’, although retaining its position as legal tender.”

The second most well known cryptocurrency is Ethereum. From what little I know, Ethereum is far more technologically advanced and is more functional, as it can be used for enabling the execution of applications and smart contracts.

But even if cryptocurrencies have some actual practical value, buying them may not actually be that safe, as this Globe & Mail/Associated Press story indicated:

“A major cryptocurrency exchange says it was the victim of a sophisticated hack that stole about $1.5 billion worth of digital currency, marking one of the biggest online thefts of all time.

Bybit said Friday that a routine transfer of Ethereum, one of the most popular cryptocurrencies, between digital wallets was “manipulated” by an attacker who transferred the crypto to an unidentified address.

The company sought to reassure customers that their cryptocurrency holdings with the exchange were safe. The company added that news of the hack had led to a surge in withdrawal requests and there could be delays in processing them.

Ben Zhou, Bybit’s CEO, said on social media that his company would remain solvent even if the hacked crypto wasn’t recovered. ‘We can cover the loss,’ he said.

Stealing cryptocurrencies is a favourite tactic of hackers. North Korean state hackers, in particular, have been linked to several high-dollar crypto thefts in recent years. “

Some people might not be so lucky if another company goes insolvent from a hack. At least some gold coins in a safety deposit box in your local bank will be insured. Gold can always be melted down and used for jewelry even if the government that issued it ceases to exist.

The real issue with cryptocurrency is something called the “Greater Fool Theory”. The idea is that even if something seems overvalued or has little actual intrinsic value, someone will think they can make money through speculation  - a “greater fool” will pay more for it in the future as the market continues to rise. This is usually true in markets where something is in short supply and demand is expected to remain high or increase even more.

If somebody invented a $Hitler cryptocurrency with a billion coins to be sold, then a couple of  neo-Nazi idiots paid $1.00 each for a couple of $Hitler coins, does that mean that the market cap is $1 Billion? Would any bank or company lend money using these coins as collateral? Of course not.

I looked at the Coinmarketcap website; there are not just dozens of crypto currencies, but actually 10,878 different ones listed. There is no shortage of fools out there.

Because Ethereum is actually more useful than Bitcoin, which really only exists to serve as a currency, Ethereum might actually have some small intrinsic value, since it costs money to create a replacement cryptocurrency for the same purpose and Ethereum already has some market acceptance. Nevertheless, Bitcoin has gone from about $22,000 to $95,000 in the last two years, while Ethereum has gone from about $1,500 to just $2,700 in the same time frame (all are USD figures).

Real estate is also prone to speculative bubbles, or even scams. The joke in many old Hollywood cartoons and movies was about swampland being sold in Florida to gullible buyers. Ironically, a lot of swampland has been turned into residential land since World War Two by essentially digging canals and dumping the stuff dredged up next to the canal to create useable land. But more often than not, speculative real estate bubbles burst, and then it takes years for prices to rise again. After some time, they do rise, partly because of inflation, but mainly because continued high population growth in North America means more land is being consumed as cities grow.

The US had a major real estate bubble that peaked around 2006. Canada was not part of it, and had its last crash in 1989, when higher interest rates, free trade, a recession, and other factors led to a massive loss in real estate values – particularly in condominiums in large cities.

Real estate prices peaked again in 2022, because of low interest rates and people moving to cities or suburbs farther away from work as remote work made this possible. But the main reason for higher real estate prices since 2015, or 2001, is Canada’s high rate of population growth. The high numbers of permanent immigrants, foreign students, and temporary workers was a major factor in the 2022 peak. Prices have dropped because of the high-interest rate policy of the Bank of Canada, and also because population growth has slowed (though permanent immigration will continue to be well above 2015 levels).

YIMBYs (“Yes In My Back Yard”) and others have also claimed that the reason for high prices is restrictive zoning laws and exclusionary zoning. Politicians are promising lower housing prices, and accepting YIMBY policies as part of the solution.

I just finished reading the e-book version of Home Truths: Fixing Canada’s Housing Crisis by Carolyn Whitzman, published in October 2024. If you use the term “Turtle Island” without irony, and think NIMBYs are a big problem, you would love this book.

Whitzman’s book makes the usual arguments that the root of the housing crisis is barriers to supply, including exclusionary zoning. High population growth is noted as a factor, but not questioned. In fact, high population growth is taken as a given rather than as a policy that governments control and could manipulate to bring supply and demand for housing into balance. Lack of supply is really a US problem. The fact that Canada has been producing large numbers of housing units and that our economy is far more dependent on construction than the American economy is ignored in the book.

Meanwhile, even if housing starts are down, the huge number of housing projects started several years ago are being completed and adding to supply, though the shift has been from condominiums to purpose built rental buildings in major markets, including Montreal. Resale houses have dropped in price a little, but the number of listings is high.

What we have is a combination of greater fool theories at work. Sellers think prices will rebound, so they don’t see the point of cutting the price when interest rates will likely drop, which will fuel demand. Buyers don’t want to pay the current prices because governments are promising to make housing more affordable, plus interest rates will likely drop too.

But despite this, the politicians in the Ontario election, and elsewhere in Canada, are still pushing YIMBY ideas of upzoning. And the funny thing is, there is no shortage of zoning or zoning applications, particularly in Toronto.

The City of Toronto Planning Department report from December 2023 showed 700,000 units in the 416 planning pipeline – about 250,000 units rezoned and 450,000 units in the queue, most of which will be approved. Toronto had about 100,000 completions in the prior 5 years, or 20,000 a year, so that means 35 years of units even if the planners stopped accepting applications.

These numbers also ignore rezonings that were approved more than 5 years ago, but are dormant. I don’t know if the roughly 10,000 units for the Portlands project or other waterfront lands are included either.

Other policies being passed in Toronto include increasing the acceptable height on “Avenues”, allowing multiplexes on nearly all low-rise residential land, and ending exclusionary zoning – though whether or not this will actually add much supply is debatable. Provincial laws like Bill 23 make upzoning near transit easier, and limit appeals to the Ontario Land Tribunal. Yet the fixation remains more upzoning and supply, not on reducing immigration!

A recent Toronto Star story focused on a redevelopment proposed at Church and Wellesley, in what has been the main gay neighbourhood for decades. A proposed redevelopment planned for a 16-storey building in 2021, but now the application has been changed to 48 storeys! For context, the two tallest buildings in Toronto’s TD Centre, both built in the late 1960s, were 56 and 46 storeys. What was once record breaking is now commonplace.

Upzoning land will almost always increase its market value – or why apply to upzone it? But with 35 years minimum of zonings in the statistics, plus more not included, it seems like developers are also relying on the “Greater Fool” theory.

The average building unit will not be completed for 20 years – that is two whole decades. Most properties will be in a sort of limbo for years, awaiting their turn to start the digging.

What is the point of so much upzoning and density? Do Toronto developers think there are other developers out there who will pay for density when there is so much in the pipeline and it is so easy to get? This seems about as out of touch with reality as investing in $Melania cryptocurrency or any of the 10,000 others ones out there.

Toronto supposedly hit 3.0 million people in 2022, and certainly has hit that number by now. But if we assume around 2.3 people per unit, then 700,000 units is 1.6 million people (condos tend to be smaller, but we are talking at least 1.5 million people). This represents a 50% increase in population in an already overcrowded and congested city, with more population growth proposed in the 905 and beyond. And we live on a finite planet, where the population is expected to peak in roughly 40 years – growth cannot continue forever.

So, there isn’t only the “Greater Fool” theory at work, there just seems to be a lot of plain fools who don’t get it that the problem is not zoning, but that the flurry of upzoning already done or in the works is just not sustainable in a city with such congested traffic, where visiting teams have to walk to the arena if a snowstorm hits. A lack of investment combined with unsustainable population growth means that Canada’s largest and most economically important city, Toronto, is probably permanent broken, at a time when people are rejecting the idea that the country as a whole is broken.