This is the third article in a series from “Anonymous” – a close friend of 4Rev’s who cannot write publicly about blockchain to contractual obligations with their employer. We hope you enjoy this piece from Anonymous.
“X person invested Y into crypto and made Z” stories… “is bitcoin a bubble?” question… “dot-com bubble or housing bubble” comparison… “criminal money” comparison… Instead, let’s elevate the conversation
Enough with the “X person invested Y into crypto and made Z” stories. Isn’t one of the core principles/disclaimers around investing that “past performance is not indicative of future returns? That premise holds for any kind of financial investment, and for general life decisions. After all, that’s why I did NOT go to law school: graduating in 2013, 2014 or 2015 did not mean I would get the same or better result as graduating in 2003, 2004 or 2005.
Enough with the “is bitcoin a bubble?” question. Sure, ask questions, but there is a chasm between asking questions and being critical. The issue is that the 2008 financial crisis still lurks in the memory of anyone old enough to know that it happened, so the phrase “bubble” connotes an inherent negativity that is not necessarily appropriate. Bitcoin and other cryptocurrencies very well may be in a bubble, but a correction that is underpinned by a new technology may not have the same negative effect as a debt bubble. This perspective has been echoed by many respected blockchain/cryptocurrency professionals. For example, during an June 2017 interview on the podcast, Unchained (hosted by Laura Shin), Meltem Demirors said “I do believe we are in a bubble… there will be a correction at some point. What happens when there is a correction?” The community needs to prepare to protect the underlying technology if/when there will be a correction, and the public cannot let the fear of a bubble overshadow the potential of a technology. The public can accomplish this by asking questions. Simply writing/reading articles that state things like “bitcoin is not backed by anything,” or quote Alan Greenspan’s statement, “the question is I do not understand where the backing of bitcoin is coming from,” without further context or clarifying questions will do little more than rile up emotions and set back the openness towards innovation. But if authors and readers ask questions like “if bitcoin indeed is not backed by anything, then should it be? What outcomes can be accomplished if it is vs. is not backed by something? Is the article that calls into question bitcoin’s stability basing its assessments on accurate or complete information, or are there gaps that I can help fill in for the author and other readers?” then thought leadership will be constructive and may even benefit the development community. Developers are humans too and so the decisions they have to make about writing code are limited by time, information and mental processing power. If people can pool their mental processing power, information and time, then maybe we can ask intelligent questions that will help developers foresee eventualities that they otherwise would not have envisioned alone.
Enough with the comparison of cryptocurrencies to the different historical bubbles. Robert Shiller, Nobel Prize-winning economist stated, “it seems like the dotcom bubble all over again, or the housing bubble all over again.” Maybe I’m taking his statement out of context, but the first thing I thought when I read that was that it feels like comparing a pineapple and an apple… just because they both end in “apple” does not mean they are the same fruit. Thank you to Marc Hochstein from Coindesk for his apt observation and explanation of the differences between a tech bubble (dotcom) and debt bubble (housing). Additionally, if cryptocurrencies and blockchain are truly so revolutionary, then why are we trying so hard to compare them to events of the past? (connect back to my “past performance is not indicative of future behavior” comment from the first paragraph)
Lastly, enough with pointing at cryptocurrencies and saying, “it’s criminal money”. Being against cryptocurrencies simply because it has a history of criminal usage is like walking with blinders on. The fact that it has a history of being used for criminal purposes does not mean it will always be that way. Dollars have a history of criminal use – hence anti-money laundering regulations and the many professionals who make it their life work to protect against such activities – but that does not mean people stopped believing in the dollar and went back to bartering. So rather than slamming cryptocurrencies because of criminal use, let’s instead ask about and report on what steps can limit that behavior without throwing the baby out with the bathwater. Thank you to Chairman Giancarlo for your acknowledgment that “we owe it to this new generation to respect their interest in this new technology with a thoughtful regulatory approach.” On the topic of this “new generation,” I would like to call into question Dennis Gartman’s statement that, “this is a market… for criminals, this is a market for millennials, this is a market for pure punters…” This loops together three groups that have very different goals and who share no connection other than utilizing cryptocurrency. Sure, he may mean it is too speculative for the older investor who needs to protect their principal and save for retirement, but I am only assuming that because I have investment experience and work in finance. For the general public, the statement can add a sensationalism which may cloud the thinking of readers and listeners who respect his experience. That sensationalism worries me even more when this same person stated in August 2017, “didn’t understand it then, and don’t understand it now.” How can someone offer such solid statements like “we’ll walk in one day and this will all have ended, and it will end very badly,” when he acknowledges that an expert understanding of the technology is missing? Wouldn’t it be better for this person to just simply ask questions that get the public thinking, and spark intelligent conversation rather than closed off sentiment? Or how about we ask:
- What would it take for cryptocurrencies to survive?
- Would we evaluate the future of any other innovation in the early stages as strictly as we are evaluating cryptocurrencies, or would we give it room to grow?
- If people are believers in blockchain but not believers in crypto, then why is that the case?
- If cryptocurrencies do indeed fail, what will be the limitations vs opportunities towards blockchain implementation?
I am personally still in the question asking phase, as we all are and should be, so ending the post on such a series of questions sounds appropriate.