moar crypto
cryptic cross words
One recent reaction to our recent articles on Bitcoin, crypto and the blockchain has been the sense of disbelief that people could fall for such a scheme - while it may beggar belief, we’ve put together the observations below.
More crypto observations….
One of the leading financial regulators was told by his daughter that everyone was going crazy about Bitcoin, “some losers, many great gainers” with nothing else talked about – his son later told him that the lunacy had reached levels that were “inconceivable” and beyond anyone’s wildest dreams or thoughts, adding that crypto’s inherently demonic nature was its genius, turning great financial centres into bedlam with its mania. (Hoppit)
The worrying point was perhaps when hodlers starting to include institutions, and even municipalities, such as the Canton of Berne. (Hoppit)
Celebrity endorsement even reached the point where movie A list stars started to talk of quitting their day jobs to trade crypto. (Hoppit)
Those who have made their fortunes propagating the scheme, reportedly have their post-crypto world excuses lined up – already having argued that the proposed act banning crypto would cause losses, not the creation and manipulated trading of crypto itself, and that having established itself on the scale that it has, pricking the crypto bubble would have calamitous ripple effects or contagion across the broader economy, with the risk of a credit crunch due to the severe impacts on corporate debt and bank lending, like a major stock market collapse, impacting all “sectors of the economy” and causing a sharp but protracted downturn. (Hoppit)
Dickson has made it clear that due to the lack of clarity surrounding it, the Bitcoin scheme has been subjected to considerable debate from an early date, including regulatory opposition from the outset. In the UK, this has included “searching criticism both inside and outside of parliament”, being described as “unjust in its nature”, with warnings of dire consequences, due the Bitcoin scheme being “calculated for the enriching of a few, and the impoverishing of a great many”. (Hoppit)
Of late regulators have stepped up warnings about cashing out of or leveraging against existing portfolios of stocks and bonds or even property in order to “exchange” liquid, high quality assets for Bitcoin. (Hoppit)
The influx of scheme promoters and crypto fund managers has been likened to the rush to the casino, with the ‘Bank’ holding all the aces and devouring the cash of the late entrants overpaying in hard currency for worthless tokens, just like “unfortunate adventurers round the board”. (Mackay)
Steele quickly derided the Bitcoin scheme as nothing but “a bulky Phantom” while Hutcheson, produced a research paper with detailed analysis, concluding about Bitcoin that the mathematics of the scheme made no sense and that therefore pamphlet “there is no real foundation for the present, much less for the further expected, high price”. (Hoppit)
Obviously Steele and Hutcheson are far from lone voices, with no shortage of other research complaining that the bubble characteristics of BTC relied on “prices being manipulated upwards” and labelling the scheme a deception. (Hoppit)
For crypto adherents, this element of gambling may not only have been widely appreciated but even relished although there is evidence of hodlers selling up before the slide of share prices set in, although not so much among the newer buyers, many of whom injected the actual cash into the scheme in more genuine trades. (Hoppit)
Peer pressure is a major factor – crypto opponents being derided for lacking understanding or even ‘courage or ability’ as one newspaper put it. Others, like Abigail Hay lamented that it being “very unfashionable” not to be in Bitcoin “I am sorry to say, I am out of fashion.” (Hoppit)
Still, those who have entered and particularly exited early enough have been able to do so profitably – in many cases with only de minimis actual real investment exposure (remember that Bitcoin which spiked to over $60,000 changed hands for just $5,000 a little over 2 years ago) (Hoppit)
Bitcoin-USD pricing, 3 years to May 2022 (source yahoo.com)
Of course, Bitcoin isn’t the only crypto – the proliferation of ‘alt coins’ reaching a peak with nonsense such as Dogecoin, to the extent that altcoins were satirised (and commentators and financial journalists reported the satire as being real – it’s always a good indication that you shouldn’t be investing when you reach the point at which when you can’t distinguish reality from satire), when a new coin was issued and all that was known about it was that it was a coin “for carrying an undertaking of great advantage, but nobody to know what it is.” (Chancellor)
If you hadn’t already guessed, all the quotations, claims and references in this article are actually in relation to the joint stock company bubble in 18th century Britain. The point of changing South Sea Company to Bitcoin or joint-stock companies to crypto was to emphasise that really there is, despite all the claims of vested interests, nothing new about crypto. If Charles Mackay (the author of Memoirs of Extraordinary Popular Delusions and the Madness of Crowds) were alive today, then maybe crypto could be an added chapter along side the South Sea Bubble, John Law and Tulipmania in an updated abridged version. But then again maybe not – as Andrew Odlyzko has pointed out, Mackay provided acerbic commentary about earlier bubbles, he was much more tolerant or unaware of the contemporary ones right beneath his nose, to the extent of being culpable of “stimulating and sustaining the greatest of these episodes of financial exuberance, the Railway Mania”.
Maybe it’s always been easier to try to pretend that we’re all a lot smarter than our predecessors and that this time really is different. Except that human behaviour does all too often repeat and therefore that we might not be any better students of human nature this time than we were in the 1720s.
Bibliography
Bailey, S., 1998. Historical Perspectives - Famous Bubbles | Dot Con | FRONTLINE | PBS. [online] Pbs.org. Available at: <https://www.pbs.org/wgbh/pages/frontline/shows/dotcon/historical/bubbles.html#F6>
Chancellor, E., 2019. Breakingviews - Chancellor: A 300-year bubble worth remembering. [online] Reuters. Available at: <https://www.reuters.com/article/us-england-finance-breakingviews-idUSKBN1YG2NH>
Gambles, P., 2022. Bitcoin basics… Even Bitterer coins & unstable coins. Available at: <https://www.researchgate.net/publication/360915822_Bitcoin_basics_Even_Bitterer_coins_unstable_coins/comments>
Gambles, P., 2022. Crypt Into Crypto. Available at: <https://www.researchgate.net/publication/360643745_Crypt_into_crypto>
Giudici, G., Milne, A. and Vinogradov, D., 2019. Cryptocurrencies: market analysis and perspectives. Journal of Industrial and Business Economics, 47(1), pp.1-18.
Hoppit, J., 2002. THE MYTHS OF THE SOUTH SEA BUBBLE. Transactions of the Royal Historical Society, 12, pp.141-165.
Mackay, C., n.d. Memoirs of extraordinary popular delusions and the madness of crowds.
Nytimes.com. 2022. It’s Hard to Tell When the Crypto Bubble Will Burst, or If There Is One. [online] Available at: <https://www.nytimes.com/2022/01/27/business/crypto-price-bubble.html>
Odlyzko, A., 2011. Charles Mackay's Own Extraordinary Popular Delusions and the Railway Mania. SSRN Electronic Journal,.
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Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.
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