(Jeffrey Tucker, FEE.org) Now, this is revealing. The New York Times ran a piece on Bitcoin with this sentence: “from less than a cent in early 2010 to around $2,600 currently.” The problem is that when the story went live, the price was actually $3,400.” An editor didn’t think to check it, because he or she didn’t know to do so.
This is how quickly these markets are moving. Not even the people assigned to be experts know enough to do a competent edit.
And this is precisely why so many of us are constantly intrigued by these markets.
Last week, when the NYT story was being filed, I was sitting at the national convention of the Young Americans for Liberty, feeling a vague sense of discomfort for one ridiculous reason. It had been a full day since I had talked with anyone about cryptoassets. So I grabbed the nearest dude and threw out a couple of observations. He lit up. He could talk ICOs, trading platforms, obscure coins and services, with the best of them. Soon others arrived. Then more. Pretty soon we had a big crowd, all talking and thinking about these bizarre new ways to invest.
Pretty interesting. I could never have assembled such a posse of group discussion if I had been talking about bank stocks and the S&P 500. Too boring. The crypto market, on the other hand, is incredibly interesting, lucrative, changing and wildly dynamic. Yes, many people lose their shirts. This is not a disgrace but a bragging right. If you have bought high and watched the thing fall to zero, it only demonstrates your derring do. If you have made money, you are a bit cheeky about it because, after all, these markets are edgy.
There is some glory in checking your smartphone in the middle of the night to find that your assets are up 10% since you went to bed. When you wake up and you are down 20% total, it’s sad but still exciting. That’s why people play these markets. And some people are truly winning.
What does it mean to be a millionaire but all your assets are in brand new digital things with names like BCH, NEO, GBYTE, FCT, or DSH? And do you really want this information known? Probably not.
It’s a Mania
Another scene: I’m at the UPS store and paying with a Bitpay debit card. The guy behind the counter nonchalantly says that his choice coin is Monero. I banter with him a bit. We do what everyone in these discussions does: we test the limits of each other’s knowledge. Who among us is the more tech savvy and experienced. Discerning that gives insight into the real question: what is your crypto net worth?
How likely is it that some dude I bump into at a mail service would know anything about this new thing going on? Could be a coincidence. Or he could be the voice of a generation. According to the New York Times, the second conclusion is the more likely truth.
After years as a niche market for technologically sophisticated anarchists and libertarians excited about a decentralized financial network not under government control, digital coins may be on the verge of going mainstream…. Cryptocurrency has understandable appeal to millennials who came of age during the 2008 financial crisis and are now watching the rise of antiglobalist populism threaten the stability of the international economy.
Typically with such reporting, there are great insights in this story, despite the misquoted price. The 2008 financial crisis traumatized a generation. They no longer trust banks. Conventional financial markets are driven by electronic trading, and there is no way to beat the market in the short run. Plus, there is the draw of the new and techy. Young people have no assets but they do have tech skill. Crypto markets are easy to get into and you are rewarded for knowing your way around. Older people tend to lack such skill, and they are afflicted by incredulity: surely this market is nothing more than a techno tulip mania.
I can recall being in front of an audience of 3,000 people some three years ago, interviewing a major and famous global investor. In passing – slightly expecting to be ridiculed – I asked about Bitcoin. He blew up in fury, as if I had committed a faux pas. This is a fake, he said, just like all social media platforms and time-wasting video games. If young people think this is productive, they are sadly mistaken. This country needs to get back to making things rather than taking food selfies.
I was crypto shamed.
And that was that.
Meanwhile, the dollar exchange ratio of Bitcoin moved from $30 to $3,000. Our savvy and “mature” and responsible investor was completely wrong. And he had misinformed thousands of people who had paid for his advice. And he was wrong because of the old Latin phrase: “Damnant quod non intellegunt.” They condemn what they do not understand.
The young have no such hangups. They don’t need a theory to justify their interests. They discern that the market is pointing a certain direction even if they do not know why. You could chalk it up to naivete of youth. Or you could look at the old investor and observe that his failure to believe is due to the foolhardy incredulity of age.
What It Is
Let me attempt, yet again, to explain why these markets are not tulipmania. Tulips had always existed. Cryptoassets, on the other hand, are a new innovation. What is it? Some people understood early on. For people not stuck in the old ways, not biased by prevailing practices, this was promising and exciting.
For the rest of us, it took time. It’s true that it is a way of hacking the internet to make a market-driven money. It’s true that the blockchain technology that backs cryptoassets makes for a great payment system, far faster, cheaper, and better than existing practices. Millennials know that the old way failed and, because of experience, they trust that there is a technological solution, even if old-world institutions are slow to adopt it.
There’s more going on than just that. This technology is the newest and best iteration of a universal human demand to document ownership rights. After many years of struggling to understand this, this is my best-possible explanation. Humanity documented “mine and thine” since the ancient world: stones, clay, parchment, vellum, databases. There must be a record to compel social assent to anything.
And it is not only about rights. It is about rules. But the failing of every previous piece of technology has been that it has been centralized: only one authoritative copy. Blockchain distributes that knowledge and authority to an infinite number of nodes.
Is that an innovation? Yes. It’s everything. With millions of applications, only one of which could imply the possibility of abolishing government money and central banking in favor of a market-controlled money. And that’s just the most obvious. Blockchain actually offers up the hope that humanity can learn to master its own affairs on a purely voluntary basis: no need for coercive relationships, geographical jurisdictions, or preemptive revenue collection by force. It’s the realization of the old liberal dream.
But not yet. It will take decades to get there. In the meantime, young people are having a blast. Good for them. They understand more about the world than those who are charged with copy editing the New York Times.