It’s been a great year for those of us who didn’t have the guts to invest in crypto. The value of Bitcoin, Ethereum and Luna crashed in May. Now crypto giant FTX has filed for bankruptcy amid serious allegations of criminal misconduct.
Finally! For years we have kicked ourselves for not investing in Bitcoin, ETH, etc. when we had the chance. We heard stories of people going from hobo to millionaire while we were grinding in our offices and fussing over debt. Suddenly we can reframe our risk aversion as foresight! Of course we knew this would happen! From Class we did!
Really, I shouldn’t be joking about this crypto craze. Many people have lost a lot of money. People will lose businesses, homes and families. Some even commit suicide. Besides, I didn’t know this would happen. I really only had a vague idea of what FTX used to be.
But I, and many others, knew something was going to happen. We never trusted the utopian claims people made about crypto currencies. As much as we envied those who bought Bitcoin for loose change and sold it for fortunes, it was clear that a select few could become wealthy operating in markets disconnected from physical goods and services. I’m not an economist, but I think ultimately there should be value placed on something we can use – or at least something we want.
As much as we all knew and know that bankers and politicians can and can be corrupt and foolish with our dollars, pounds and euros, we knew that crypto currencies were not a foolproof path to freedom and independence when their value depended on common sense and the morals of a bunch of weird nerds online. Crypto may have evolved since the head of Canada’s leading crypto-currency exchange disappeared and died, taking access codes worth $250 million worth of other people’s money to his grave, but the vast majority of users are still alienated from the elite that really makes a difference.
Now it’s easy to gloat. As the headline of the modern classic Onion reads, “Man Who Lost Everything In Crypto Wished Several Thousand More People Had Warned Him.”
Still, we shouldn’t gloat too much, and not just because it’s mean. After all, the worst aspects of crypto are sort of reduction ad absurdum of the modern world. It has no intrinsic value, sure, but does the 21st century have any news for us about the direction of economic life or anything? Financialization and deindustrialization have conspired to ensure that much the same is true of sprawling first-world economies.
The value of crypto seems to crash with greater suddenness and force than the value of fiat money. However, it takes a fool to mock impoverished Bitheads too much as inflation – and even hyperinflation – threatens us. How safe are U.S savings? Safer perhaps, but how much?
In the aftermath of the FTX scandal, questions are being raised about the integrity and credibility of the financial and philosophical sphere of eccentric CEO, Sam Bankman-Fried. (Bankman-Friend appears to be on the run after allegations of misuse of funds.)
In addition to crypto spaces, these are also organizations that are committed to new goals such as ‘long-term thinking’ and ‘effective altruism’. How moral are effective altruists really, people wonder, if their main lender was involved in a huge scam? Long-term experts, meanwhile, are committed to improving humanity’s long-term prospects — but Tyler Cowen rightly questions how much we can trust people pondering our future if they didn’t see this great, looming danger in their own country. Would you trust a dentist with advanced tooth decay?
These are good questions, but there are many more to ask, and from more important people. After all, Sam Bankman-Fried was not a dissident outsider. He was one of the largest donors to the Democrats. He collaborated with the World Economic Forum. He spoke on panels with Tony Blair and Bill Clinton. Forbes featured him on the cover of their magazine – with, admittedly, the potentially telling line: “He’s a mercenary, dedicated to making as much money as he can (he doesn’t really care how) only to give it away (he does don’t really know to whom, or when).”
The collapse of FTX raises questions about the vulnerabilities of crypto and alternative systems of financial and philosophical thought, but also raises questions about the mainstream. How weird San Francisco utilitarians and effective altruists were absorbed by Bankman-Fried is worth asking. But why Biden, Blair, and the WEF — and those around them — thought he was the kind of guy they wanted to associate with is also curious. Carelessness and credulity, or worse, are not limited to any particular atmosphere in this sad tale.
In the end, crypto is not going anywhere. Its attraction can be dimmed, but it will not be extinguished. As Murtaza Hussein writes, it has great value for those who want to bypass governments and financial institutions. Even though it was rocked by bad news in the West, it thrived in Africa and South America.
The bright idealism of his early years has faded – and he deserved it. As with all utopias, an imaginary jungle sprouted from a seed. Many people have suffered. Let’s not put all our money in crypto. But let’s not pretend it’s a crazy alternative to a stable and secure status quo either.