Words from a Bitcoin/crypto Detractor
And Sen. Elizabeth Warren for the Lose - Yet Again
Yesterday, I watched the Senate Banking Committee Hearing on FTX, and made an effort to listen to all arguments - for and against crypto - with an open mind.
Some words from actor Ben McKenzie Schenkkan resonated with me.
(Before sharing those words, though, I’d like to state that I’m curious as to why people care what an actor from the teen drama The OC thinks about cryptocurrency. I mean, everyone is entitled to their opinion, but, seriously, who is this guy?)
Anyway, here’s what Schenkkan had to say:
“Robert Shiller - the Nobel Prize winning economist - talks about how economic narratives form. They’re in response to real events.
In this case, with cryptocurrency, I would argue that the genesis was the subprime crisis. The Bitcoin white paper, released in October of 2008, was perhaps well-intentioned.
It was intended to be a peer-to-peer currency that would avoid all intermediaries. So, the story has understandable appeal.
I think if crypto serves any function, it’s to highlight the myriad failures of our regulated system - and our banking system - and our American economic system to provide people with a fair shot at the American dream - or what’s left of it.
That does not make the story true, however… the story of cryptocurrency. What it does is lend it enormous power.
And these stories spread, as Shiller describes, like viruses, infecting one person to another, much like a multilevel marketing scheme, but for the digital era.
Instead of a five-hour Tupperware party, you get a 60 second TikTok video. And you’re encouraged to invest because you see other people investing.
They call it FOMO - Fear of Missing Out. We used to call it greed.
People get very excited. These bubbles build up very big, but then they collapse very swiftly. And I think that’s what we are seeing now today.”
I’ll start by saying he accurately framed Bitcoin’s arising from the subprime mortgage crisis in the US.
I’ll also say that I love what he had to say about the “myriad failures” or our current economic and financial systems.
And I’ll say that of course the fact that Bitcoin was created in reaction to a crisis doesn’t make the “story” of it true.
There is no “story” to Bitcoin - at least not one that it’s inventor, Satoshi Nakamoto, left us with. All he did was write an 9-page paper that outlined the technical parameters of this new asset.
As far as the story that surrounds Bitcoin, the best way I’ve ever heard it described was as a “collective delusion,” which is what Balaji Srinivasan called it.
All money is a story or a collective delusion. Some money - like Bitcoin - is just better designed than other forms of money.
That being said, the stories that people craft around Bitcoin and other cryptos are powerful - and many of the people crafting these stories are scam artists (this is more the case with purveyors of super shady shitcoins).
And Schenkkan is absolutely right in that the way the message of crypto spreads is like that of an MLM scheme.
Most people (like myself back in 2018) do/did buy in because of FOMO, as opposed to just dollar-cost averaging into the asset class and not expecting to get rich quick.
I’ve said many times that if you choose to invest in this asset class, you should view your initial investment in it as a downpayment for your education of Bitcoin/the asset class and not as a means to get rich overnight.
If you’ve invested in Bitcoin and haven’t gone down the rabbit holes of Austrian economics, Modern Monetary Theory (MMT) and the political and social effects of fiat currency debasement, then you’re doing it wrong.
If you haven’t developed your own thesis on why Bitcoin is an important asset, then yes, this all just looks like a big get rich quick Tupperware party.
Schenkkan is quite wrong in his last statement, though.
What “we are all seeing now today” is the result of good old fashion fraudulent actors like Sam Bankman-Fried and others like him in the industry who got caught running Ponzis that had little to do with the underlying assets.
Those of us who understand the basic tenets of Bitcoin and who don’t leave our assets - or at least the majority of our assets - in the custody of third parties are fine.
Sure, the price of Bitcoin is down significantly from its highs, but it’s also up over 500% from its March 2020 lows.
While Schenkkan did make some good and important points in his testimony, please keep in mind that these words come from someone who obviously doesn’t believe in the power of this technology.
Will Bitcoin ultimately triumph? In my opinion, it already has in many ways.
Will it continue to triumph? I don’t know - and neither does anyone else.
Governments can’t stop the protocol itself, but they can do a lot to make it difficult or even unlawful for people to use Bitcoin or other crypto protocols and/or to gain access to the digital assets on them via crypto exchanges.
Personally, I live with the fear that some sort of bigger, globally coordinated crackdown will happen one day, but I don’t let that fear guide my decision to remain invested in the asset or not.
I invest in Bitcoin because I believe that it is a counter to central banking systems, which have put many people around the world in precarious financial situations.
I believe that Bitcoin is both hope and a store of values.
But that’s just my thesis. I’d encourage you to develop your own - and I encourage you to learn how to self-custody your Bitcoin and other digital assets, as well.
Good place to start below. (Solid video/terrible tile)
More Hot Air from Sen. Elizabeth Warren
This week, Senator Elizabeth Warren along with some of her colleagues introduced the Digital Asset Anti-Money Laundering Act, which stipulates that miners, validators and developers on blockchain networks be regulated and money service businesses and, as a result, have to KYC their non-custodial wallets.
For a minute, I got kind of scared, as I thought that maybe this bill would get enacted into law, and that eventually Warren and other politicians of her ilk would then push for everyone in the US to KYC their non-custodial wallets, which would, at least in part, defeat the purpose of an asset like bitcoin (BTC).
But then I realized two things:
At this point, the crypto industry luckily has lobbyists and non-profits like Coin Center that have already come out to declare what this bill tries to do as “unconstitutional and opportunistic” and will thankfully fight to make sure that this bill doesn’t turn into law
Before today, I had little idea how ineffective Sen. Warren has been as a lawmaker. I came across the tweet below this morning and didn’t believe it was true at first.
So, I went and did some research and found this government website - which does in fact prove the statement above to be true.
While Sen. Warren loves to talk about her “plan” for things - she has an abysmal track record when it comes to actually legislating.
The words of Jeff Booth - author of The Price of Tomorrow - in a recent interview with Nik Bhatia - author of Layered Money - came to mind.
And I paraphrase:
Voting [Author’s note: I think he meant politics] today is just theater on top of a system of debt that no one can ever pay back.
So, Sen. Warren, keep playing the role of an authoritarian who promotes government overreach in this season of Politics, and I’ll keep not taking you seriously.
Best,
Frank
Twitter: @frankcorva
Currently reading: What Has the Government Done to Our Money? by Murray N. Rothbard
Currently listening to:
