Call me old. Call me stuck in the past.
I am tethered to the analog world of things I think are real.
I don't mind ageism. It is the one arena where people still joke about their prejudices against people as a group without getting shamed.
We are different from younger adults and it makes sense to acknowledge reality. Age 75 is not age 55. It defies observation to pretend old people are some sort of generic homogenized "adult"--just like younger adults--in the imagined discrimination-free, prejudice-free world of pretend equality. Legally we are like younger adults. I am fine with that. But physically and mentally and attitudinally we are different. For one thing, we have memories and experience.
That brings me to crypto. I still don't get it. I think it is a Ponzi scheme and a scam. I think it is like an investment in baseball cards, comic books, or Beanie Babies. They are a castle built on rainbows.
The fact that Bitcoin prices have gone down in value in the past year may take some of the blind enthusiasm out of the supposed asset. Bitcoin is down just under 60% for the year.
Bitcoin was all the buzz a year ago because it had made some lucky or smart people wealthy--at least at that moment. It was up 400% in five years.
A few places will exchange goods or services for it, which technically makes it a medium of exchange. Bitcoin is not useless. It can be used for secret transfers of large amounts of wealth--ideal for drug transactions or tax avoidance. Large transfers of U.S. dollars are tracked. Under current tax law, people file tax returns stating under penalty of perjury that they are reporting their cryptocurrency transactions. That is hard to enforce.
This blog started with a headline that I was tethered. I am tethered by my experience and memories. I have experienced the boom and bust of assets that had value based on scarcity mixed with public enthusiasm. I don't trust that. I trust utility as a better reflection of wealth. I remember the internet stock bubble. Or the Beanie Baby fad. Or Precious Moments "collectables."
There is something big that tethers the U.S. dollar. We can pay taxes with it. The tax bill comes with a dollar figure and we can satisfy that debt with a dollar payment. Federal, state, and local taxes are my biggest obligations. I need dollars to pay them. Men with guns and the ability to seize my property stand behind collecting those obligations. If, for example, Jackson County, Oregon told me I could pay my property tax bill with either $10,000 or half a bitcoin, payable on November 15, then on that day I would have a choice. I could either give them a check for $10,000 or I could look at the price of bitcoin. If it were the price it is today, $19,250, I could buy that half a bitcoin for about $9,625, and pay the bill that way and save money. Other people would do the same thing, bringing the value of Bitcoin right up to the $10,000 level--if there were enough people in Jackson County to move the market. Bitcoin and the dollar would trade at a parity of value--$20,000 per full Bitcoin--set by that link. That tethering won't happen until a larger collector of debts than Jackson County, Oregon provides an ongoing open-ended willingness to settle obligations to it in the form of both dollars and Bitcoin at a set price. I expect that the only debt collector big enough to do that is the U.S. government. itself. I don't expect the government to agree to that.
I think cryptocurrencies are a bust waiting to happen. They aren't money. They are a collectable. I may be wrong. I am certainly old-fashioned in my thinking.
If someone young and smart wants to do a guest post explaining why Bitcoin and other cryptocurrencies are valuable, please write.
Warren Buffet was right about the eventual dot com bust because there were no real underlying assets, and he is right about seeing crypto as doomed to fail. You are in good company, Peter. Just like a Ponzi scheme, there will be some winners, but there has to be losers.
Call me old then also. I too am tethered to the analog world of things. I have had my youngest son, who has had friends that made a great deal of money in cryptocurrency, attempt to explain it to me. I still don't get it. He is an extremely intelligent guy and was eager to invest in it himself about a year ago. I sure hope he didn't.