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The most lucrative business activity in America is the practice of convincing people that things are too complicated for them to understand. Once they’re convinced, anything is possible. Any product or service with a demand and this sheen of mysticism can go, as they say, to the moon. Customers rarely consider the possibility that things might burn up upon re-entry.
This conjured aura of an urgent fear-of-missing-out propels entire industries. Billions of dollars can be made cultivating people’s fear that an opportunity is passing them by. It amounts to an entire chunk of the economy that does little more than pull up next to consumers in a mysterious van and yell, “No time to explain — get in!”
Enron, the most famous corporate fraud of the early 2000s, was brought down by one reporter who was brave enough to admit she did not understand how the place was making so much money. That open curiosity is sometimes all it takes to puncture the collective delusion that protects these things. An entire ecosystem of people who profit from our periodic manias exists to carefully nurture those delusions, to ensure that nobody starts yelling too loudly about the invisibility of the emperor’s new clothes.
What is a cryptocurrency? And why would it be worth a lot of money? The official answers to these questions have always been fine examples of obscurantist word salad. A digital “token” that anyone can mint from scratch, that is not really a currency and that is not really a claim on a business with a cash flow, is not something that really has any intrinsic value. It’s just a bauble, a collectible, worth whatever you can convince someone to pay for it. It is the raw material of hucksterism. You may fold up paper into little origami birds and I may pay you a dollar for one, but it is unlikely that you and I and ten million of our friends will become millionaires by all folding up little paper birds and selling them to one another in a big merry-go-round. Like cryptocurrencies, little paper birds amount to a zero-sum game. They do not grow the world’s wealth; they are just an easily manipulated way of moving that wealth around.
Nevertheless, the inflation aspect of the crypto bubble made a lot of money for a lot of lucky (or feckless) people. As eventually happens with all bubbles, it seems crypto has now popped — there are not infinite customers to keep this all going. In the past year, Bitcoin has lost about three-quarters of its value. Lesser cryptocurrencies have done even worse, and the industry has seen a wave of bankruptcies, culminating in the spectacular collapse of the crypto trading crown jewel FTX, which went overnight from being worth $32 billion to being worth less than zero dollars. Mop-haired young FTX founder Sam Bankman-Fried instantly lost his multibillion-dollar fortune and status as a top political donor and financial wunderkind. His company was horribly (perhaps criminally) managed, but the deeper reason FTX lost its value was that the product it was trading, the one that lent it all that value on paper, did not have any underlying value itself.
The real value of crypto, now, is that it serves as a demonstration of the rot at the heart of America’s hustler-centric model of capitalism.
In these situations, the middle class and the poor and the desperate are the propellant for the bubble’s ballooning. All the regular people who flocked into crypto — the ones who signed up because they work too hard and still can’t pay the bills — collectively represent the money that bought Bankman-Fried’s $40 million Bahamian penthouse. Think about that, and then take a hard look at the now-infamous photos of Bill Clinton and Tony Blair laughing it up on stage with Bankman-Fried at a 2022 “Crypto Bahamas” event. They, and the politicians who took crypto industry money to push regulators away, and the celebrities who took checks from crypto firms to make Super Bowl ads urging everyone to buy in before it’s too late, are all predators who pose as saviors. Their success can be measured by statistics, such as those showing that Black Americans (who statistically face more poverty and discrimination and have less wealth than white Americans) are more likely to invest in crypto. That fact is not coincidence, and it is not something anyone should be proud of.
The scandal is not crypto. The scandal is the fact that the respectable business and political and cultural establishment is only too happy to stand up and endorse the latest sure-to-be-devastating scheme if they believe it will put a dollar in their pockets. That’s capitalism, baby. Its logic is relentless and seductive. When the next big thing you can’t quite understand comes around, take a deep breath. Justice and fairness and equality are very straightforward concepts. They don’t tend to make you a fortune, but they will never rip you off.
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