This post is discussed in Episode 12 - Bitcoin Hipster.
There's a small voice in my head that feels smug and vindicated with the current ridiculous rise in price of cryptocurrencies, having bought Bitcoin at $100 my sophomore year in college (Bitcoin at time of writing is at $17,000, others up 100% or more). I was the ultimate evangelist for the technology too: I've bought dinner in BTC, tumbled ETH, and explored dark net markets through a homemade Tor-OS bootstick. I've tried hardware wallets, participated in ICOs, and gone to meetup after meetup in the Bay Area since moving here. I've made my own little blockchains just to wrap my head around what the fundamental innovation really is. I was even one of the founding members of a meetup group in Madison, WI, called Mad Crypto, which wanted to educate people and bring together the like-minded to make money and promote an ethos. I've since moved away from Madison and the meetup has partnered with another called Madison Blockchain, but they've been holding educational events, helping people participate, and being open to anyone and everyone who is curious about this interesting world. If you live in Madison I recommend it.
My knowledge and experience in the space has culminated in people wanting me to manage their funds for them, to make them money and get in on the action. It had me on the verge of creating a crypto hedge fund with the purpose of capitalizing on my knowledge and spreading the ideas while making some serious money. Charging fees, developing a prospectus, saying "Trust me". It had me doing everything cryptocurrency is not. The whole point of cryptocurrency is that you don't have to trust someone else to buy and use it! The irony of bitcoin is that it is None of the Things it was Supposed to Be. It's destroying the planet quite literally by using as much (mostly fossil-fuel) energy as 3 million US homes. For what? To make VISA and Venmo and BofA obsolete? To destroy central banking and allow people in Zimbabwe to trade goods and services with people in Belgium? Ideally, yes. In actuality, not at all. It's attracting banks and hedge funds, not scaring them. It's making people never even try to spend it rather than use it to transact. It's inefficient, expensive, and full of middlemen instead of immutable and peer-to-peer. So why is it all going up, up and away? In my opinion...
Greed. Sheer greed on a scale that is almost unfathomable, with hundreds of billions of dollars of value appearing almost over night, and everyone wanting a piece. It's very rarely about ideology or trying to create a better future. The best case scenario driving the BTC rise is FOMO: everyone wants in on the action and the Coinbase app is all you need to get started. The worst case is the biggest pump and dump scam of all time, with institutional investors, banks, crypto hedge funds, derivatives, and a global marketplace with little understanding of what it is doing trying to make a bunch of USD that wasn't there before. Like buying houses or beanie babies. Like shorting the US economy, which also made a bunch of people very rich. Ask Michael Burry or Steve Eisman what they think of how that all went down.
A bubble is trade in an asset at a price that strongly exceeds the asset's intrinsic value. Bitcoin is by definition a bubble. All currency is. But a real currency is a bubble that never pops (and I don't think Bitcoin will ever pop). You can't eat the pieces of paper in your back pocket with dead presidents on them or burn them to stay warm or put them in a gas tank and expect to go anywhere. They have value because we all believe they do, and for no other reason. Gold isn't great for much except high-grade electronics, yet its scarcity is what keeps the price up. It's easy to agree that gold can store value and serve as a medium of exchange because nobody can go make a bunch more and prove its worthlessness. Seashells, rose petals, and beaver pelts could do the same, at least for a time. Bitcoin also has scarcity built right in to the system so it's got that going for it, which is nice. People believe Bitcoin is valuable. I believe it is valuable. A 9-page whitepaper resulted in nearly $300 billion in value. There's a lot of "there" there. But you can't pay your taxes in Bitcoin. You can't pay your landlord in Bitcoin, or buy your groceries, and it certainly doesn't store value very well. So right when this shitty Republican tax bill passes and people have to come up with rent, the first thing they liquidate is their fake internet money that never left their Coinbase wallet. There will be plenty of liquid rich people to pick up the slack, though. The great democratizing, peer-to-peer transactive technology will be owned entirely by the 1%, most likely to launder money and avoid taxes just like most complicated financial instruments, propped up by a religious belief in its ability to free us from VISA and The Fed. Case-in-point is the Winklevosses, who are now billionaires. Good for them; they really deserve it. Now they have nothing holding them back from pursuing their dreams.
What I'm trying to say is check your greed. Consider the environmental consequences. Consider your own goals and future. If you have a use for Bitcoin then go buy some and use it. If not, maybe figure out a diversified retirement investment plan that gives good yield and stays relatively safe because cryptocurrency is not a magic money making machine, as much as people want to believe it is. I typically point to this post on Reddit when people ask me why I invest in and use cryptocurrency. It's not about profit, or lambos, or the Moon. It's about taking some agency back from central banking, from this late-stage capitalist system we live in that won't rest until the caste system is set in stone. I do that in other ways too: I invest in companies I believe make the world better like Tesla; I try to live below my means and consume less, want less, and look inward rather than at what my neighbor has. The second cryptocurrency stops fulfilling that promise is the second I throw it to the curb. And I try not to let greed consume my life, which I believe necessarily precludes running any sort of hedge fund. Checking greed is not easily done. It gets harder and harder to do the further that price climbs, the more valuable my wallet bits become, the more I-told-you-so I get to say. But it's absolutely worth it. The planet is worth it, your hard-earned savings are worth it, and your sanity is worth it.