Well, maybe it’s not that different after all, because it turns out a lot of people don’t have that ability. When TerraUSD, a stablecoin – that is, a cryptocurrency that is supposed to be pegged to the dollar or another asset – lost almost all of its value this month, it happened so quickly that many investors lost everything they had in the market. Another stablecoin, DEI, has sunk as low as 52 cents, instead of the promised dollar. Bitcoin itself, which is not pegged to any currency, is down more than 50% since its peak last fall.
In many cases, it is those who can least afford to suffer this kind of loss who suffer the consequences. The crypto was aggressively marketed as a chance to catch up with groups who felt left behind in the still unequal United States. Time and time again, proponents have said that blockchain will be a force for financial fairness, enabling people traditionally excluded from American wealth-creation mechanisms, such as housing or the stock market, by breed or lack of capital.
Matt Damon proclaimed “Fortune favors the brave,” for Crypto.com, an exchange where people can buy and sell over 200 cryptocurrencies, in an ad that aired during the Super Bowl. (He is now, somewhat less courageously, decline to answer questions from NBC News about it.) Kim Kardashian shilled for a piece, one that soon dropped 98%. Politicians argued that crypto would make the financial world fairer. Rep. Ritchie Torres (D), who represents a low-income Bronx neighborhood, called it “deeply progressive cause.”
Please. This is, at best, speculation. Despite all the claims that blockchain will revolutionize finance, the only thing it has improved so far is the ability to launder money and transfer money for other illegal activities. A hedge against inflation? A theory that didn’t work. A substitute for cash? Try to use it. It’s difficult and time-consuming, and I promise you’ll switch back to traditional currency right away.
The problems continue. Regulation is light to non-existent. Theft and fraud are commonplace and victims have no recourse. If your credit card is hacked, you are only responsible for $50, but if your multi-million dollar crypto wallet is chosen, you are SOL, as they say online. And despite all the talk about letting everyone in on the action, just over 25% of bitcoin is owned by 0.01% of investors inside.
Yet 1 in 5 Americans of investing age took the bait, many of whom could not afford the risk. Survey after survey finds that young people are more likely to enter the sector than middle-aged and older people, and black people more than white people. And another thing: half started investing in the sector in 2021, according to a survey published by Grayscale Investments, a crypto management company – in other words, when crypto was at all-time highs. (A survey conducted last fall by Cardifya market research firm, found that only 14% had been invested in the sector for more than two years.)
None of this should inspire confidence. That’s right, whether you sincerely believe the world has yet to harness the power of blockchain, or whether you believe, as the spirits on Twitter say, that blockchain and its cryptocurrencies are Beanie Babies for Bros, disguised as techno-libertarian gibberish.
Even if the full potential of Web 3.0 is realized and blockchain is its core architecture, that doesn’t make this thing a good game. Railroad was a breakthrough technology in 19th century America that created fortunes incalculable for a lucky few, but about 25% of railway companies went bankrupt after the Panic of 1873. The same thing happened again after the Panic of 1893.
The dotcom bubble offers a similar lesson: Amazon has done so well that its founder now owns this newspaper, but Pets.com is a punchline. As Securities and Exchange Commission Chairman Gary Gensler recently said when discussing crypto, “I don’t think there’s long-term viability for five or six thousand forms of money. private”.
It’s a brand of, well, brands that they think they can outsmart all of that – they’ll pick the cryptocurrency that both survives and soars, or knows the exact right time to exit. They can’t all be right.
Crypto hits that American sweet spot, where cynicism meets utter naivety, and everyone thinks the sucker at the table is someone else. By the time many find out they’re the biggest jerk, it’s far too late to do anything about it. The fact that in many cases these are people who already receive a raw offer makes the situation even more painful.