- Crypto is for speculators, criminals, and people who like playing pretend central banker.
- It is mostly a dangerous nuisance. It is not the future of money.
- This is an opinion column. The thoughts expressed are those of the author.
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Cryptocurrencies are for speculators, criminals and cosplayers. Aside from that, they’re useless, and I’m tired of everyone trying to pretend otherwise.
I have waited for years for someone to explain to me a decent use case for cryptocurrencies. But throughout the recent fervor over crypto with its huge price boom and subsequent bust, I’ve yet to hear one.
I understand it as a fun speculative asset if you have money to burn and a tolerance for stomach-churning volatility. But you need to understand that it is neither an inflation hedge (as it has demonstrated over the past few weeks), nor a “store of value,” nor a viable alternative to government-backed currencies.
The entire asset class (strong words for it, I think) is extremely opaque and there are embarrassingly few rules governing how it circulates, so if your “digital money” is stolen or you get scammed, I don’t want to hear about it. The very things that make it fun for gamblers — like volatility — are some of the very things that make it dangerous for anyone who thinks it is a good investment.
It’s easier to understand the craze if you accept that there really is no point. Just let that wash over you.
Crypto was, in part, born out of the idea that libertarian doomsayers in Silicon Valley could do currency better than the US Treasury. The argument for crypto was initially — and sometimes still is depending on who you ask and what time of day it is — the lack of government involvement and the supposed ability to put the power more directly in the hands of users.
At it’s core crypto is a short America play, effectively arguing the value and primacy of the US dollar will collapse and crypto will step in as an alternative. But given the dominance of the US dollar in global finance and America’s still-incredibly strong global position, that seems like a dumb play.
Instead of replacing a currency backed by the full faith and credit of the most powerful country in the world, so far crypto has only managed to create a speculative asset people like to pretend to understand, is beloved by criminals, and has all the stability of a drunk Real Housewives cast trying to fight their way out of an escape room.
This is why companies that had once said they would keep crypto on their balance sheets as an alternative asset are already backing away from that notion. After buying $220 million worth of Bitcoin in October and February, Square’s CFO says it no longer plans to buy more after taking a $20 million impairment charge. Tesla also bought $1.5 billion worth of Bitcoin, but the company’s CEO Elon Musk recently said it will not be purchasing more due to the environmental cost of Bitcoin.
And maybe Musk really is pausing Tesla’s bitcoin buying for Mother Earth. Maybe — even though the world has known about the massive energy it takes to mine Bitcoin for years — Musk just had a come-to-Jesus moment. That’s weird given that he runs a company dedicated to saving the environment — but okay.
For now, Musk has moved on to pumping the meme-based dogecoin and generally mucking things up when it comes to crypto more generally. If you want to follow him into that after witnessing his 180 on bitcoin, be my guest.
Welcome to Never Ever Land
Now normally I have no problem with cosplaying. If you want to pretend like crypto will in some completely illogical way protect you from the end of the world, that’s your affair. If you want to pretend to be the head of the European Central Bank or the Federal Reserve , knock yourself out.
But let’s be totally clear — you are not actually a central banker. If a geopolitical Rapture does come, no one will care that you think you understand monetary policy. And if the end of the world comes in such a way that the US government in all its might can no longer enforce the primacy of the dollar, we are in trouble way beyond the “dollar debasement” the Winklevoss twins pretend to understand. At that point I think that whether or not you can get to your “wallet” on the “blockchain” is truly an open question. If in fact our economy is dragged back into the Stone Age, better to have something tangible you can barter like bread, or a generator.
In addition to giving Silicon Valley nerds with an Apocalypse fetish another way to annoy us all by cosplaying as a government, crypto has also made committing crime that much easier.
Want to buy drugs online? Use crypto. On the run from the US government because you helped plan the attack on the Capitol on January 6? Ask your followers to send crypto. Want to hack into Colonial Pipeline and ransom the company for $5 million without getting caught? Make your victims send you crypto.
The hacking group responsible for the hack into the Colonial Pipeline is known as DarkSide, and blockchain investigators at a group called Elliptic claim DarkSide has ransomed $90 million worth of crypto from 47 victims. DarkSide doesn’t just do that kind of work for itself, either, it also develops and sells ransomware tools to other would-be hackers so they can join the fun. This is unacceptable, and it all has got to go.
The US Treasury says that people are using crypto to avoid taxes. The Bank of Canada has decided that crypto is an “emerging financial vulnerability” and that its intrinsic value is “hard to establish.” Bank of England Governor Andrew Bailey said that crypto is “dangerous” and that anyone holding it should be prepared to lose all their money.
Now, you may be one of those people who disagrees with all of these central bankers, and thinks you know more about the stability of the economy and the future of payments than they do. That is because you are an extremely committed cosplayer.
What is all-too-slowly becoming apparent is that crypto is more nuisance than anything else. It lacks any real value or use that real currency cannot provide. It is, however, great for really risky gambling. Pretending that you are smart enough to get to build your own government. And crimes. That’s really it. People have had years to change my mind on this, and I’m done waiting.