THE CASE AGAINST CRYPTO

Dogecoin? Dogs**t Coin More Likely

Sharper brains than mine are promoting crypto currencies of all stripes, but my considered view is that

• the king has no clothes
• when the Dutch went nuts for tulips in the 17th century at least the flowers smelled nice
• when someone says “This time it’s different” about money… run for the hills
• what was built as a joke will have a nasty punchline for millions.

Every pusher, dealer, promoter and fan of crypto shouts that the debasement of fiat currencies has only one tearful conclusion and digital, non-regulated currencies are the only way to protect your wealth. But while FIAT (latin for “made” or “done”) currencies may not be backed by gold, they are backed by whole economies, controlled by professional managers in central banks, subject to constant revaluation via interest rates and market transactions, and understood by the billions who use them every day.

In contrast, crypto is backed by nothing except a rapacious use of energy, is open to manipulation by influencers, drug dealers and money launderers, does not carry interest so value changes only on the basis of speculation, fluctuates in value to such a huge extent that it really can’t be classed as “money” but only as “speculative monetary assets”, and finally is not understood by those who use it to a great extent.

That final statement is at the core of the issue we face… am I, along with millions of doubters, right in saying that crypto fans don’t understand what they’re doing. Surely that’s arrogant and assumptive of me?

My reasons are both historical and economic:

• the Dutch (the DUTCH… the most practical hard-headed people in Europe) went wild for tulips just four lifetimes ago; they invented the stock exchange, they traded anything they could make money on, and became one of the richest societies in Europe doing so; they believed for a short time that tulips were more valuable than gold; well that didn’t end well.
• Fear and greed have driven speculative bubbles for millenia; from the time of the Romans to the collapse of collateralised debt obligations (huh?.. yeah, me too) during the GFC human beings have invested their hopes, borrowings and greed into instruments that didn’t quite match their expectations; why would this be any different?
• There is an excellent video on Youtube called “Why the Majority is Always Wrong” (https://www.youtube.com/watch?v=VNGFep6rncY); it’s worth watching and simply summarised it says that if you do what everyone else is doing you get the same results; think about what that means when millions are piling into a “speculative monetary asset”.
• The technology underpinning cryptos seems incredibly powerful… blockchain or distributed ledger technology has the potential to connect and secure assets, information, identities, contracts, etc, etc. But any technology can manifest in myriad ways, and crypto is only the most visible and fevered of them. Blockchain/DLT will quietly change the world in the same manner as the internet, mass airline travel, democracy, or the invention of money did originally.
• Crypto is not the only form of digital currency; if you are paid into your online bank account, use credit, debit cards or Apply Pay for almost everything you sell and buy then you’re already there.
• JFK’s father famously decided to sell all of his stocks before the crash of 1929 because the shoe shine guy was giving him serious investment advice; with no disrespect to shoe shine guys the world over, they rarely have the knowledge or experience to intellectually drive the world of investment and money; if the profile of the average crypto “investor” (wrong word) or Game Stop rescuer is viewed I posit that few of them could hold a conversation with Warren Buffet.

Time for me to stop. Believing in crypto is like believing in God, a particular religion or a political conviction. Nothing written here is likely to divert one single crypto speculator from their faith. Elon Musk, the Chinese development of a state digital currency (I wonder how the term “unregulated” will apply there) and several banks and billionaires tell us that crypto is here, crypto is the future, and crypto is where to put your money. Two final comments:

Quis bono?

The King really had no clothes.