Despite The Crypto Crash, Bitcoin Still Has a Bright Future

You might call it the cable that changed history. In the mid-19th century there were various attempts to lay cables across the Atlantic Ocean between Britain (Ireland) and the US.

It took several failures, numerous bankruptcies and over ten years before they got it right. But eventually they did and on July 27 1866 Queen Victoria broadcast a message to US President Johnson…

Money is a form of communication technology

Here’s what the first transatlantic cable said:

Osborne, July 27, 1866 

To the President of the United States, Washington 

The Queen congratulates the President on the successful completion of an undertaking which she hopes may serve as an additional bond of Union between the United States and England.

Johnson replied:

Executive Mansion Washington, July 30, 1866 

To Her Majesty the Queen of the United Kingdom of Great Britain and Ireland 

The President of the United States acknowledges with profound gratification the receipt of Her Majesty’s despatch and cordially reciprocates the hope that the cable which now unites the Eastern and Western hemispheres may serve to strengthen and perpetuate peace and amity between the governments of England and the Republic of the United States.

To send a message by ship could take ten days or more; now it was a matter of minutes. So somebody came up with the slogan “two weeks to two minutes”.

Transmission speeds improved rapidly; Morse code became words and it was soon possible to send multiple messages at once. By the end of the 19th century, Britain, France, Germany and the US were all linked by cable.

Personal, commercial and political relations were altered for all time.  Back then gold was money, of course, as were paper notes representing gold. You couldn’t send gold down the cable, however, nor paper. But you could send a promise.

And, within a fortnight of Queen Victoria’s message, that’s what two parties who trusted each other did. An exchange rate between the dollar and the pound was agreed and then published in the New York Times on 10 August. That is why, to this day, GBP/USD exchange rate is known as “cable”.

My purpose with this story is to illustrate a point: what is money, but a form of communication?

Look at a £20 note (if you still use them) and you will see the words “I promise to pay the bearer”.  Of course, promises disappear; gold doesn’t. The two are quite different forms of money: one is belief, the other is real.

Nevertheless, since the dawn of civilisation, we have been using promissory money. In Ancient Mesopotamia, people used mud tokens, representing sheep or barley, baked inside clay balls to log debts owed. They found it more efficient to draw pictures of the tokens in the mud for the same purpose, which is how the first system of writing developed.

In Ancient China, people recorded their debts on bits of leather; after the invention of printing they started using paper. Today the promises are recorded and exchanged between trusted third parties on computers.

Millions, probably billions, of promises are sent across the internet every second, transferring as quick as words, probably quicker. Not only does (promissory) money evolve with communication technology, it is often the spur, the impetus for communication technology to evolve.

Now bitcoin, with its blockchain, obviates the need for trusted third parties altogether – that is one of many reasons it is so special. Here is a money communication network backed instead by mathematical proof and the most powerful and resilient computer network ever known to man: the trusted third party is the blockchain.

Why would you not want to own a share of such a breakthrough technology? That, effectively, is what owning some bitcoin is – owning shares in a new monetary technology. And it’s not like they are doing any roll backs.

Money has evolved like language

I want to explore this idea of money as communication further.  It’s often said (by me at least) when considering politicians: look at what they do, not at what they say. What we do says more about us than what we say – what we do with our money says even more.

And what we do with our money communicates value, not just between buyer and seller, but across the economy. What is the price of this thing? What is its value? The answer is constantly being sent and received, digested and acted upon; and so does the economy constantly, incrementally evolve and develop with each new signal: the how, why and when, of what needs producing and where.

Money, then, is like a language, constantly evolving and changing. Nobody is really in charge – it wasn’t really planned, it has just constantly evolved. The architects of fiat money did not plan what we have today, they just used it to get out of a tight fiscal spot – extenuating circumstances at the time.

Similarly, nobody planned the language we speak today. Language is hard to plan and regulate, try as many have over the years – and still do. The English we speak today is a long way from the English of Chaucer, Shakespeare or Dickens. There are probably fewer words; certainly fewer tenses. Grammar is simpler. Yet English is far more widely spoken. The network has grown.

Mandarin may have three or four times more native speakers, but English is more widely spoken. There may well come a time when everybody in the world speaks it. It is the dominant linguistic network.

Meanwhile, other languages fade away. Cornish has gone. Few now speak Welsh or Gaelic. The local dialects of France and Italy are disappearing. Similarly, there are no doubt a plethora of African, Asian and American languages that are on the way out, if they haven’t already gone.

The question to ask is this: how scalable is the language? English has the potential to become the default language of the world. Despite having more native speakers, that’s unlikely to be the case with Mandarin. It’s certainly not going to happen to Gaelic, Neapolitan or Swahili.

How many different monies have there been in history? Shells, whale teeth, metals, paper, cigarettes, mackerel packs, cognac, Zimbabwe dollars, reichsmarks, denarii, farthings, shillings. Most have died. Only gold goes on.

But, as with transatlantic cables, you can’t send gold over the internet. Only golden promises between trusted parties.

Bitcoin is money for the internet

The US dollar is the global reserve currency. You can send that over the internet. But it’s hard for people who aren’t American to get US dollar bank accounts. Foreign exchange fees are expensive. Money transfers can take several days sometimes.

It’s a national currency that is used internationally. A country – and several do – could use it as their national currency, but they would be importing US monetary policy too, and so subjecting themselves to US political whims. Which is why most countries with their own political agenda issue their own currencies.

Thus, though “international”, as a national currency, the US dollar is limited by its national borders and its politics. The same goes for any national currency.

But language is not limited by national borders – or at least English isn’t. If only there was an apolitical, borderless currency for the borderless economy that is the internet, then that really would be scalable in a way that no national currency is. A network that has evolved organically, and is constantly growing.

You don’t need a bank account to start using bitcoin. You only need a phone with an internet connection. We are not far off that point when everyone who wants one has one. My argument is this: if money is language, then bitcoin is English. It has a potential to scale that no other currency has.

Just as an aside on how quickly money evolves – it’s worth remembering that as recently as the 19th century, the pound had greater global recognition than the dollar. In emulation of Jules Verne’s Phileas Fogg, who went Around The World in 80 Days, in 1889-1890 American journalist Nellie Bly went on a trip around the world in 72 days.

She took pounds, but she also brought some dollars, “as a test to see if American money was known outside of America”. She went east from New York, and did not see American money until Colombo, Sri Lanka, where $20 gold pieces were used as jewellery. They accepted her dollars – but only at a 60% discount.

It’s a bit of an ask – though possible – to get people to accept bitcoin in the physical world. But that is not what it is for. It is money for the internet.

Dominic Frisby author headshot

Source: Despite the crypto crash, bitcoin still has a bright future | MoneyWeek

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Coinbase Cracks Down Front Running of New Crypto Listings

Digital asset exchange Coinbase will take action against front-running of new cryptocurrency listings on its platform as part of its “zero tolerance” approach.

In a company blog post, CEO Brian Armstrong announced new measures of listing and reviewing tokens on the platform to prevent traders from examining its listing information or software to guess what assets would be listed in advance of the wider market knowing. This included using on-chain data to check if Coinbase is testing new assets integrations.

“We’re also aware of concerns that some market participants may be taking advantage of information from our listings process,” Armstrong said on Thursday. “While this is public data, it isn’t data that all customers can easily access, so we strive to remove these information asymmetries.”

“We’re adding new forensic tools to better prevent front-running, while also ensuring that we can move more quickly to de-list assets that appear to be run by bad actors,” the company tweeted.

Front-running means using non-public information about upcoming token listings to invest in them before the wider market. Coinbase received reports of people seemingly buying particular assets right before their listing announcement and benefitting from the accompanying price movements, Armstrong said.

“Finally, there is always the possibility that someone inside Coinbase could, wittingly or unwittingly, leak information to outsiders engaging in illegal activity,” he said. “We have zero tolerance for this and monitor for it, conducting investigations where appropriate with outside law firms.”

Armstrong said Coinbase’s trading policy restricts employees from trading in crypto assets on the back of material non-public information.

The platform aimed to list all legal assets while also protecting customers and maintaining a level playing field, Armstrong said. He laid out minimum listing requirements that included testing for legality, security, and compliance.

Some of the changes Armstrong announced included publishing decisions to list a token only when the decision had been made, labelling for newer and less well-known assets, and launching asset reviews and ratings.

“It’s always tricky to find the right balance on enabling innovation while simultaneously protecting customers from bad activity, but that is exactly the hard work that we need to do each day,” he said.

Coinbase is the largest crypto exchange in the US. It currently lists 174 coins, according to data provider CoinMarketCap. The company added 95 coins for trading last year, and more than 70 for its custody service, according to Bloomberg.

By:

Source: Coinbase Cracks Down Front-Running of New Crypto Listings

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Critics:

While the exchange has faced fierce criticism from the crypto community over its asset listing criteria, Armstrong doubled down on its approach in his post. “At Coinbase, our goal is ​​to list every asset that is legal and safe to do so,” he said, claiming that the exchange had no business in picking winners and losers. 

Earlier this month, Coinbase came under heavy fire after UpOnly host and influential crypto trader Cobie publicly called the company out for listing relatively unknown, dubious projects with low market capitalizations, such as StudentCoin, Polkamon, and Big Data Protocol. Notably, Coinbase has neglected to list many other assets that play a crucial role in the cryptocurrency ecosystem, such as Terra and Fantom. 

“Big Data Protocol, virtually completely dead prior to [the Coinbase listing blog post, has pumped 132% as a result of this news!” Cobie wrote, stressing that the coin had a market capitalization of only $1.5 million before the listing.

That wasn’t the first time Coinbase has listed questionable assets in favor of larger, more established projects. In February, the company was criticized for listing Pawtocol, another low-cap coin that claims to use blockchain “to improve the lives of pets and pet owners on a global scale.” Per data from CoinGecko, Pawtocol briefly rallied on the news but has since tanked, now more than 50% down since the listing and 84% short of its all-time high

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Crypto Investing In 2022 What Can You Look Forward To

2021 was a year of epic growth for cryptoassets. We saw the market take a big leap towards maturity as trends such as non-fungible tokens (NFTs) and the metaverse gained momentum, and regulators contended with the asset class’s growing role in the global economy.

More rapid change can be expected in the year ahead, with the crypto market hitting maturity amidst a changing macro environment and red hot inflation readings. In five concise trends, here is what you should be watching as we move into 2022.

1. NFTs move beyond JPEGs

Non-fungible tokens (NFTs) hit the mainstream in 2021. Brand names from Adidas to Budweiser and Pepsi to Warner Bros issued their own collections,  sports fans rushed to buy tokenized cards for their teams on platforms such as Chiliz, and luxury fashion houses including Givenchy dropped tokens to heighten exclusivity.

All of this demonstrated the revolutionary potential of the “NFT” — which was proclaimed Collin’s Dictionary’s word of the year.As we move into 2022, NFTs are set to move beyond just collectible JPEGs. The NFL is now working with Polygon to use NFTs for ticketing, TikTok has released trending videos as NFTs, and a diverse range of companies are starting to use the unique tokens to power radical change in how products are funded, licensed and promoted.

2. Blockchain gaming and metaverse boom

2021 saw the rise of a younger, faster generation of blockchains such as Solana, which offer the high performance needed for sophisticated blockchain-based gaming.Meanwhile, the first crypto games hit the big time. Axie Infinity attracted almost 2 million daily users with play-to-earn mechanisms, and investment poured into metaverse projects from all angles:

Facebook rebranded to Meta and tech giants Microsoft and Amazon dipped their toes, while venture capitalists committed billions to making the metaverse reality.Moving into 2022, this sector of the market is primed to hit the mainstream. All we are waiting for is the catalyst of a high-quality game or social platform that can bring in a broad audience beyond just crypto enthusiasts.

3. Layer 2s steal the limelight

The popularity of decentralized finance (DeFi) and NFTs has created bottlenecks on Ethereum, with congestion pushing network fees to all-time highs.Against this backdrop, Layer 2 scaling solutions such as Polygon (MATIC) have experienced epic growth by offering faster speeds and lower fees with no compromise to decentralization or security.

This trend is set to accelerate in 2022, boosted by new cryptographic innovations — such as Optimistic Rollups and Zero-Knowledge Rollups — which are finally ready for action after years of development.

4. Crypto payments hit the mainstream

2021 showed that payment giants see crypto not as a threat, but as an opportunity: Visa launched a crypto advisory service, Mastercard introduced crypto support, and WhatsApp began testing crypto payments via the Novi wallet.Governments have seen the potential of crypto payments too. El Salvador claimed to be saving $400 million a year in  Western Union fees by using Bitcoin remittances, and a parallel government in Myanmar adopted Tether as an official currency.

These events could be the first signs of a global transformation in payments and remittances; one that is likely to gain momentum in 2022 as more organizations realize that money can be exchanged instantly and inexpensively — as easily as sending an email.

5. Even more regulatory scrutiny

With former blockchain professor Gary Gensler leading the charge at the U.S. Securities and Exchange Commission (SEC), authorities around the world are racing to roll out regulatory frameworks.In the US, regulators are discussing a “crypto sprint” to quickly bring the industry into line, while across the Atlantic, the European Union’s (EU) proposed regulatory framework — Markets in Crypto Assets (MiCA) — is close to becoming law.

This activity will likely mean more scrutiny than ever before for the digital asset ecosystem, but if the approval of multiple Bitcoin ETFs around the world and the positivity of the recent US congressional crypto hearing are any indication, then 2022 could be the year we see regulators cautiously embrace cryptoassets.

Source: Crypto investing in 2022 – what can you look forward to?

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Critics:

Pete Howson, a senior lecturer in international development at Northumbria University in Britain, said 2022 is likely to see “stronger public opposition” to bitcoin on environmental grounds, which could force regulators to act more decisively.

A YouGov poll in October found nearly half of Britons supported banning cryptocurrencies to fight climate change.Scandinavian countries have voiced support for a potential ban on bitcoin mining across Europe, and, if that happens, authorities elsewhere might be driven to take a similar stance, said Howson.

“Massive power outages caused 700 deaths in Texas this time last year … and since then, we’ve seen the U.S. overtake China as the bitcoin global superpower, with much of that extra burden added to the Texas grid,” he said. “If again we see ordinary folks freeze to death in places like Texas, the bitcoin bros will be out on their ears.”

At the same time, the industry could be pressured into addressing its “sustainability challenges”, according to Alexander Hoptner, who heads BitMEX, one of the world’s largest virtual currency derivatives exchanges.

In November, the company said it had gone carbon neutral, offsetting emissions from its bitcoin transactions and servers by buying $100,000 in CO2 credits, a model some green groups criticise, saying it simply gives major polluters a way to avoid cutting their own carbon output.

“We’ve already had very encouraging chats with other exchanges, protocols, and organisations who are keen to work together to help lower the environmental impact of crypto,” said Hoptner. “I think 2022 will be the year that the crypto industry comes together to answer those who’ve challenged us to seize this responsibility.”

“Central banks around the world are bowing to the reality that digital payments are becoming the norm,” he said.”Maintaining the relevance of central bank money in retail transactions necessitates the creation of digital versions of their currencies.”From Russia to Chile, many countries have started to look into CBDCs, with tests and rollouts scheduled for 2022.Some, like Japan and Sweden, have already started trials….

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What Are NFTs? Everything You Need To Know

NFTs are the latest cryptocurrency rage these days, with bands like Kings of Leon releasing their next album as limited edition “golden tickets,” and NBA digital collectibles being sold for millions of dollars. They’re interesting to collectors and cryptocurrency fans alike, but is there a future there? In other words: Should you spend some actual dollars to invest in a digital trinket?

What Are NFTs?

NFTs, or non-fungible tokens, are a type of cryptocurrency created on a smart contract platform such as Ethereum, Avalanche or Solana. They are unique digital objects that can be cool to own or even profitable to trade. Think of them as digital collectible cards. They typically start out as something only enthusiasts care about, but if you get a rare one, it could be worth a lot one day.

What is fungible vs. non-fungible?

Cryptocurrencies can be fungible, meaning all the currency’s units (i.e., tokens) are the same and equal, like (for example) dollars or common shares of a company. You give me a dollar, I give you a different dollar back, and we’re both back to exactly where we started.

Non-fungible tokens are the opposite — every cryptocurrency unit, or token, is unique and cannot be replicated.

This “non-fungible” property can be used for many things, even certain types of currencies. But the current enthusiasm over NFTs is mostly fueled by digital art and collectibles. People have figured out that a unique, digital object can be interesting, cool, and even have a significant monetary value. It’s why the space has recently blossomed, encompassing thousands of projects involving artworks, gaming, and sports.

How do NFTs work?

It really depends on the platform. But given the vast majority of NFTs are created and traded on Ethereum, we’ll focus on that.

NFTs are created on Ethereum’s blockchain, which is immutable, meaning it cannot be altered. No one can undo your ownership of an NFT or re-create that exact same one. They’re also “permissionless,” so anyone can create, buy, or sell an NFT without asking for permission. Finally, every NFT is unique, and can be viewed by anyone.

So yes — it’s like a unique collectible card in a forever-open store window that anyone can admire, but only one person (or cryptocurrency wallet, to be exact) can own at any given time.

In a practical sense, an NFT is typically represented by a digital artwork, such as an image. But it’s important to understand that it’s not just that image (which can easily be replicated). Its existence as a digital object on the blockchain is what makes it unique.

How do I buy or trade NFTs?

NFTs are bought and traded just like any other cryptocurrency based on Ethereum, only instead of buying some amount of tokens, you buy a single token.

To do that, you should start by installing Metamask, a browser extension that lets you interact with various facets of Ethereum, such as exchanges and dApps (decentralized apps). MetaMask is also a digital wallet for Ethereum and all the tokens created on Ethereum (both fungible and non-fungible).

After installing the extension, you should buy some Ethereum (you can do it directly in MetaMask with a debit card or Apple Pay by clicking on “Add Funds”). But be very careful with your funds — store your MetaMask password and your wallet’s private key somewhere safe. Then, when you visit a website that sells NFTs (such as NBA Top Shot) or a marketplace where you can trade them (such as OpenSea), connect your MetaMask wallet to the site (only do that on sites you know are safe), and buy your first NFT.

Why do NFTs have value?

Of course, before you buy anything, you’ll probably want to know why it’s a good purchase. Indeed, why would anyone buy an NFT and why should there ever be a buyer willing to spend even more money down the line?

Ideally, the value of NFTs doesn’t just come from a game of digital hot potato, in which you purchase something hoping you’ll sell it for more later. And so on, until the whole thing crashes. Ideally, the NFT should be valuable to you because… you like it. If you’re an NBA fan, you might want to have an official NFT representing your favorite player. Or, perhaps there’s a digital cat that you really like.

Sure, in some ways, many NFTs are just a digital image that you can easily right-click and save to your computer. But NFTs also reside on the blockchain, which makes it extremely hard to truly copy them in their entirety. The blockchain entry also transparently tells you who created the NFT. If a famous musicians says: “Yes, that’s my Ethereum address that created this digital image of a possum.” Then that can be verified on the blockchain.

Some NFTs can be valuable in other ways. Say, for example, you buy an NFT related to an online game. Perhaps that NFT will one day give you special prestige in the game, or it could even be the basis for you getting some other, hard-to-get object; something that only you can have because every NFT is unique. If you’ve ever played World of Warcraft or a similar game, you know how valuable a piece of armor or a weapon can be. Now, with NFTs, no one can take it away from you, not even the game’s owners.

Let’s return for a second to that game of digital hot potato. NFTs are a nascent space, and there’s a lot of hysteria and scamming going on. You might see a certain NFT sold for millions, and think you’ll also be able to buy something for a few dollars and become rich selling it to someone later on. It can happen, but it’s rare.

And these things can be manipulated. For example, a cryptocurrency whale (someone that owns vast amounts of crypto money) can buy many NFTs and then “sell” them to himself (his other cryptocurrency address) for millions, artificially inflating the price. So be careful: Just because some NFT was traded for a lot of money, do not think this automatically means all other similar NFTs are valuable as well.

What are the most expensive NFTs?

In the early days of the space, we saw a blockchain game like CryptoKitties sell virtual cats for tens or even hundreds of thousands of dollars. Music producer 3LAU sold a collection of 33 limited edition NFTs for more than 11 million dollars. The musician Grimes (aka the mother of little X Æ A-Xii) even sold her digital art collection for $7,500 apiece, totaling $6 million in sales. CryptoPunks, which are amongst the most coveted NFTs around, regularly sell for millions. Yes, these things can get very pricey.

Are NFTs a good investment?

Buying an NFT because you like it, or maybe even to earn (or lose) a few quick bucks is one thing. But investing in NFTs is another. Again, it’s a nascent space. Even a Van Gogh painting or a rare Babe Ruth baseball card required some passage of time before becoming very valuable.

Given the digital nature of NFTs, it’s hard to compare them to prized physical artworks, such as statues and paintings. On the other hand, we live in a world where one Bitcoin is worth more than $50,000, so things from the digital realm can certainly be very valuable and even sustain that value over longer periods of time.

In any case, if you plan to invest in NFTs, you’ll need to dive deep into this complex world because each NFT market is slightly different. It’s also pricey — trading on Ethereum can be quite costly as the network’s recent congestion is causing fees to rise. Finally, you’ll need to think strategically and follow the often rapidly changing cryptocurrency trends. In short, it’s possible to earn money by investing in NFTs, but you’ll have to do your homework.

By Stan Schroeder

Source: What are NFTs? Everything you need to know.

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Money Has Never Felt More Fake

Calvin Becerra went viral earlier this year for a less-than-ideal reason. He got bamboozled out of what he claims is some $2 million in cryptocurrency and NFTs and complained on Twitter about the incident. Scammers pretended to be interested in buying one of his NFTs in a Discord channel and tricked him by saying they could help him fix a problem with his crypto wallet. During troubleshooting, they raided his wallet. The experience, he says, “felt like death.” He’s gone to great lengths to get the stolen digital assets back, paying hundreds of thousands more dollars to retrieve the tokens, including, most importantly, his three bored apes.

For many outsiders, it’s hard to grasp paying so much money for a trio of cartoon monkeys once, let alone twice. At some point, you’ve just got to let sunk cost be. But Becerra, 40, insists it’s worth it — he believes in NFTs, or at the very least, the moneymaking power of them. “They’re important to me because of the value that they will continue to increase by,” he says. “They’re huge.”

He’s right that NFTs — non-fungible tokens, little digital assets that exist on a blockchain — are having a moment. What’s not really clear is why. Then again, everything about money feels a little strange at the moment. Between NFTs, crypto, and GameStop, AMC, and other meme stocks, money has rarely felt more fake. Or, at the very least, value has rarely felt so disconnected from reality.

The concept of value is a fuzzy one, and valuation is often more art than it is science. Psychology has always played a role in money and investing — and there have always been bubbles, too, where the price of an asset takes off at a rapid pace and disconnects from the fundamental value. As Jacob Goldstein wrote in Money: The True Story of a Made-Up Thing, all money is sort of a collective myth. “Money feels cold and mathematical and outside the realm of fuzzy human relationships. It isn’t,” he wrote. “Money is a made-up thing, a shared fiction. Money is fundamentally, unalterably social.”

The social aspect is clear in much of what’s going on now, whether it be a group of investors on Reddit trying to take down a hedge fund betting against GameStop or people paying thousands of dollars to claim ownership of digital art they could effectively have for free. But why certain groups of people have trained their focus on certain items is hard to parse. Becerra insists there’s a utility to the apes — there’s merchandise, events, and he sees having them as the “new world flex,” like a watch or a nice car. “Everything’s hype, a social media world, right?”

Lately, the hype aspect of money has felt more true and important than ever.

It’s been a weird year in money

Historically, the economy was theoretically based on labor and value creation at the individual level, and on the structural level, voting shares in companies based on their financial fundamentals and future value, said tech industry veteran Anil Dash, CEO of the programming company Glitch. But that idea died long ago. “A machine is what it does, and the purpose of the system is the output of the system. And the purpose of our financial systems … is to create ever more detached financialization that can just generate what the industry calls wealth and what the rest of the world just doesn’t see.” In other words, the confusing status of value today is a feature, not a bug.

You can see this clearly in the markets in 2021. One of the first big stories of the year was the GameStop saga, and it was a fun one. An army of day traders on the Reddit forum r/WallStreetBets drove up the price of the game retailer’s stock in a matter of days, forcing halts in trading and costing some hedge funds that had been betting against the stock quite a bit of money. They rallied behind a guy who goes by Roaring Kitty; in one YouTube video about GameStop, he pretended to smoke a cigar while wearing a cat mask.

There have been all sorts of efforts to ascribe some bigger takeaway to the GameStop story — perhaps it was a populist uprising or a sign that there was something very broken in the market. But generally, most of the efforts to pull a concrete meaning out of GameStop fall flat. It was a relatively ephemeral incident where, as is often the case in investing, there were some winners and some losers. GameStop’s stock price has remained relatively high, compared where it was before January 2021, because enough investors have stuck around to keep it there.

GameStop has come to epitomize an era of meme investing, where ordinary investors are piling into stocks and cryptocurrencies and digital assets not necessarily because they believe in the underlying value of the thing they’re buying (though some do) but instead because it just seems like a thing to do. Dogecoin or NFTs or stock in theater chain AMC get popular online or in their social circles, and they turn around and think, why not?

“For a huge swath of the retail world, the mentality has merged of what is trading versus what is investing versus what is essentially just gambling,” said Tyler Gellasch, executive director of Healthy Markets, a nonprofit.

The scenario has generated quite a bit of fingerwagging from Very Serious People who say what’s going on is beyond the pale, that investing is supposed to be about underlying value and the real, tangible worth of a thing. NFTs and Shiba Inu coin, they say, are clearly fake. At the same time, so is so much of what’s going on in finance and the economy already — including the spaces the Very Serious People occupy.

During the 2008 financial crisis, for example, exotic financial instruments created out of subprime mortgages among Wall Street and banks helped take the economy down. They also revealed regulators to be asleep at the wheel. Very recent history makes it hard to take the Very Serious People in finance and government seriously as responsible stewards of the global economy. The financial industry has gone to great lengths to create new financial products with the potential to do more harm than good in the name of making more money.

“To have a boomer burn down the planet and then have them wag a finger that crypto’s bad for the environment? Please, that’s absurd,” Dash said.

“Money feeling strange in 2021 is based on a decade of money slowly feeling strange for lots and lots of different people throughout the world,” said Lana Swartz, an assistant professor of media studies at the University of Virginia who focuses on money. “We’re at a stage where the government and financial institutions are revealed to be less dependable than we ever imagined they would be, so why not YOLO?”

A made-up quote from a 2021 Onion article gets at the attitude:

NFTs might be bizarre speculative bullshit, but what isn’t? Aren’t we all just finding ways to turn everything that exists into something we can make money off of? I might be throwing away thousands of dollars on NFTs, but you’re throwing away thousands of dollars on TSA PreCheck or lottery tickets or donating to political candidates or raising children. Critics will say NFTs are wasteful and can be used for fraud and other crimes—fine, yeah, find me something that isn’t?

The view may be nihilistic, but in the current scenario, it isn’t entirely wrong. So much of the economy feels like a scam — the gig economy, student loans, the hope of retirement, a 9-to-5 job. Consumers are always being tricked and squeezed by corporations. The promise of the middle class is fading fast, so for a lot of people, it just feels like you might as well lean into whatever financial chaos is available to try to hit it big. If housing prices are so high you’re never going to be able to own a home, why not try your hand at real estate in whatever the metaverse is?

Crypto feels like a scam. So does a lot of the economy.

It’s easy to be dismissive of the current state of casino capitalism, where random people are just tossing random money at random anything. It’s also relatively easy to recognize that this landscape is likely to be one where there are few winners, and the winners are probably going to be the people who were already winning, financially.

“For every one person that makes money, you have 100 people that have lost money. It’s basically just a giant wealth redistribution scheme,” said Stephen Diehl, a software engineer in London who recently laid out a scathing and widely read critique of the crypto asset bubble. “Why it seems so fake is nobody can quite figure out what these things are, and they’re being presented to different people with different stories.”

Dash is one of the originators of the NFT concept, but he worries about the clearly fraudulent nature of some dealings in the market. “They had to coin the phrase ‘rug pull’ to describe the fraud that happens in NFT communities because that type of thing is so common. What does that tell you?”

Value is ultimately a story, one we tell to ourselves and to others. In the United States, we’ve convinced ourselves of the story of the dollar, which is backed by the full force of the US government. But it’s ultimately just a piece of paper. Cryptocurrencies and NFTs and AMC all come with their own stories, which, admittedly, can be on the kooky side.

There’s more to the current money landscape than dogecoin and meme stocks that makes the whole thing seem a little fake. The stock market soared during much of 2020 and 2021, even during the depths of the pandemic, making it hard not to wonder what the whole thing is for. The federal government was able to deliver a lot of money through monetary and fiscal relief to keep the markets — and regular people — afloat. It’s a lesson that when the government needs to find money, it can. But whether or not the influx makes money feel fake depends on your perspective.

“Isn’t this the year that money has felt most real?” said Mike Konczal, director of macroeconomic analysis at the Roosevelt Institute. “Child poverty cut in half, unemployment insurance capable of giving workers actual bargaining power for a change, real wage increases across the majority of people, wealth doubling in the bottom 50 percent.”

It’s a strange place we’re in, which might explain why these tangible improvements don’t seem to dislodge national feelings of alienation. The state of the world and the economy can feel really hopeless. There’s mass distrust in institutions and in government, and economic mobility is increasingly hard to achieve. We’re in the midst of a pandemic that doesn’t look like it’s ever going to really end. NFTs feel like a scam, but then again, so does everything.

Becerra appears determined to stick with NFTs, despite having been very publicly scammed. After all, he’s gone to great lengths to get his bored apes back. When he talks about them, he vacillates between speculator and true believer, in one moment saying he plans to sell them if the price gets high enough, in another talking about them with quite a bit of affection.

“I’m not holding this forever. I don’t care about those apes that much, you know?” he said. He knows the hype could fade. Maybe that will take the sudden value of his cartoon monkeys with it; maybe it won’t. However, he considers the apes to be “blue chip” NFTs, a designation that in the stock world would put them on the same level as well-established major corporations such as Apple and Berkshire Hathaway. “That’s why someone like me, who has money, invests only in the blue-chip ones.”

Most of this is probably a bubble

Becerra, who describes himself as a motivational speaker, high-performance coach, and entrepreneur, compares the current moment in crypto to the 1990s. “This is our dot-com boom,” he said. Of course, the dot-com boom ended in a bust.

It’s impossible to look at what’s happening in investing now and not think that that the prices on many of these assets are divorced from their actual worth. The value of random NFTs and cryptocurrencies skyrocket seemingly out of nowhere, sweeping up hundreds and thousands of people in the process. Sometimes, the bubbles burst fast because the investment falls out of fashion or it winds up being a pump-and-dump scheme, where fraudsters are creating a buying frenzy around certain assets only to suddenly dump them and flee. The broader crypto bubble is still inflating.

If NFTs and crypto, as a concept, prevail, it’s unlikely all of the current projects and fads will. Everybody’s hoping they’ve got a golden ticket, or at least a gold-plated ticket, that they can sell before everyone else realizes what they’ve got is a fraud. Some people in the industry acknowledge that most of this stuff is likely to implode.

“The parallels with the dot-com boom are very apt, the reason being that like 99 percent of these coins out there are going to be worth zero in 10 years. But the ones that remain, the companies that remain … those are going to survive and create long-lasting things that change our lives,” said Jim Greco, managing director of crypto trading at Radkl, a digital trading firm. “Amazon survived the dot-com boom.”

If you buy into the idea that a lot of this investing is pretty divorced from reality, then the question is how long this lasts. For now, the music’s still playing, so people are dancing. How long the song keeps going depends on how long the people holding onto the assets can keep singing.

“It’s really incumbent on people who hold these investments to perpetuate their value, whether that’s through evangelizing to other people or by building systems to make it usable and useful and relevant,” Swartz said. “But then in order to realize the value, to translate it into money, you have to sell it.”

If and when the bubble around some of these hyped investments bursts, a lot of people are going to get hurt and lose money. In NFTs, evidence suggests those who are already wealthy and powerful are the ones ruling the roost, just like in the stock market. While there are true believers in crypto projects, so much of it is just speculation, and venture capitalists and hedge funds are more likely to win the speculation game than the little guys caught up in the mania.

Hilary Allen, a law professor at American University who specializes in financial regulation, said the risk around so many speculative and contrived investments on the market is more tied to the potential ripple effects. Essentially, is the current moment the dot-com bubble or the lead-up to the 2008 financial crisis?

“If it’s just a dot-com bubble, it sucks for the people who invested,” she said. “But if it’s 2008, then we’re all screwed, even those of us who aren’t investing, and that’s not fair. It really depends on who’s getting into this and how integrated it’s getting with the rest of the financial system.”

Emily Stewart

Emily writes about the intersection of business, politics, and the economy. She is specifically interested in how people experience the forces of capitalism and money. Prior to joining Vox, Emily covered politics at The Street, including the rise of Donald Trump and the stock market’s reaction to politics and policy. She graduated from Columbia University and resides in Brooklyn, New York.

Source: From crypto to meme stocks to NFTs, money has never felt more fake – Vox

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