Palmer Luckey. Simply the title conjures vibrant fantasies of military-grade virtual reality helmets. It recalls his doomed donation to that pro-Trump meme factory, which most people assume ended his career at Meta. Now, he’s back – with Erebor. This fully-digital bank focused on startups and crypto companies has an astounding $2 billion valuation. Two billion dollars! Entrepreneurial genius, or Luckey’s pet project? Or is it a clever tactic from his deep-pocketed supporters? It might just be something much worse and more chilling. Let's dive in.

Trump's Embrace, Crypto's Euphoria?

Let's not pretend the timing isn't interesting. Surprisingly, Donald Trump, who started as one of crypto’s biggest naysayers, has turned into one of its biggest advocates in recent weeks. Suddenly, a bank catering to crypto companies, backed by prominent Trump supporters Peter Thiel and Joe Lonsdale, is valued at two billion dollars?

  • Unexpected Connection: This feels less like a calculated financial move and more like a perfect storm of political alignment and speculative frenzy. Think of it like this: remember the dot-com boom? Companies with vague business plans and no revenue were being valued at astronomical figures simply because they had ".com" in their name. Is "crypto" the new ".com," and is Erebor riding that wave?

Circle’s stock price has jumped more than 113% since its debut on the public markets. This amazing growth drives the tale of the story of Wall Street’s newfound interest. Let's be real: one company's success doesn't guarantee a healthy ecosystem. That’s the same as saying just because Apple is successful, then all is well on every other tech company’s farm. Absurd!

SVB 2.0 or Calculated Risk?

The Silk article is a bit coy about specifically drawing a parallel with Silicon Valley Bank (SVB). That should send shivers down your spine. Remember, SVB was the bank of choice for all those risky startups, and we all remember how that turned out.

  • Key Differences, Key Concerns: Erebor's focus on crypto companies adds another layer of risk. Crypto is notoriously volatile. Building a bank on a foundation of volatile assets is the equivalent of building your house on quicksand. Sure, the idea is great, but the execution is fraught with peril.

Erebor's planned crypto-collateralized lending is particularly concerning. Lending money against crypto assets? What happens when Bitcoin crashes (again)? Will Erebor be forced to do so, setting off a contagion that engulfs the entire crypto ecosystem, and perhaps the broader economy? This risk extends far beyond Erebor — it’s the kind of systemic risk that concerns us.

Luckey's Gambit: Redemption or Repeat?

Palmer Luckey Smart as hell gets quick little hands-on with the eyebrows-palmingst genius. Just as impressive, he used that experience to later create a longterm successful defense tech company. His past controversies cannot be ignored. What is happening now though, is his political affiliations have become inseparably tied to his business investments. Does that make Erebor inherently bad? No. This raises some critical questions about the motivations for the investment. It’s a call to action against the power of ideological agendas to steer business away from good decisions.

  • The Question of Influence: Are Thiel and Lonsdale investing in Erebor because they genuinely believe in its business model, or is it a strategic move to support a politically aligned venture and further entrench themselves in the crypto space as Trump regains political power? It's a question worth asking.

Ultimately, Erebor’s success depends on more than good PR and political favor. It will require a robust business case, rigorous risk management, and a healthy perspective. The $2 billion valuation seems overblown, an outcome of the short-lived Trump-fueled crypto bubble. We’ll find out soon if it’s a stroke of genius or just a recipe for disaster. I, at least, am doing so with a healthy dose of skepticism. You should too.