Why Our Fascination With Crypto?
Those in the staid world of global finance remain quite steadfast that cryptocurrency is purely a speculative asset. Last year, crypto ads were all the buzz for the Superbowl. This year? None. Yet PayPal just revealed it holds over $600 Million in crypto, mostly in Bitcoin and Ethereum.
Crypto right now may be entering a winter, but we are still fascinated with it. It has a huge following, but in actuality represents very little in terms of global wealth. Why does it still fascinate us?
Boil it down and we might well say that crypto is a social protest movement. It may well end up changing our global financial systems. Maybe. Eventually.
Crypto has arisen at a time when we’re experiencing significant wealth inequality around the world. You don’t have to look very hard to find news headlines of this fact. A look at the Gini Coefficient, a measure of social equality, backs this up as well.
We’re seeing echoes of America’s Gilded Age and the time of the Robber Baron’s. Industrialists who came to be perceived as monopolists and unscrupulous entrepreneurs. Many of these entrepreneurs used lobbying tactics to maintain their holds. Sound familiar? The fear of them became so palpable that it lead to the Sherman Antitrust Act of 1890. Indeed, rail and oil monopolies would be eventually broken up. In 1933, President Roosevelt, during the Great Depression, introduced the New Deal to improve wealth distribution. It worked.
Prior to the rise of modern capitalism, which is hotly debated still, has been around for around 500 years. As it took root in the early 19th century at scale, it was a time when we all agreed to shift from money based on current, existing, real assets to future-based, imaginary ones.
Human societies have a very long history with various forms of economic systems. What is called in anthropology reciprocity systems. From bartering for goods and services through to placing a value on items. Indigenous Native Americans has various systems of reciprocity including shells and animal teeth. The Andean societies had the Quipo, which can be compared to an early form of blockchain.
As humans shifted from a hunter-gatherer way of living to building towns and cities and eventually empires, money became increasingly important as we needed new systems of reciprocity. Over the past few hundred years, we’ve developed increasingly complex economic models, especially around ownership of things like property and especially lots of new imaginary values like commodities futures and derivatives.
Throughout human history, when wealth tends to be harder for non-elites to attain, revolutions typically follow. Enough societal pressure is put on existing systems that they are forced to change. Today, cryptocurrency is one form of social protest against a system that many believe no longer works for them.
It is a protest that can scale and fits in with some of the zeitgeist of the digital age. It is easier to access and to use in the real world than fringe ideologies such as the Sovereign Citizen movement.
The downside of crypto right now however, is that in its early stage, it is indeed highly speculative and has proven fertile ground for many scammers to take advantage of. Unlike existing financial systems, which although not perfect, offer greater protections.
So will cryptocurrencies come out of their winter and become more socially acceptable? Most likely. Exactly how though and when, is impossible to predict. While history doesn’t repeat, it often rhymes. Even leading financial thinkers like Ray Dalio are seeing a cyclical repeat. He may well be right. Or some variation thereof, which is more likely.
Sociocultural fascination with systems of reciprocity have existed for thousands of years, they’re deeply engrained as part of culture and culture is made up the knowledge we use to live our lives. We are entering a time of significant macro sociocultural change. Cryptocurrencies are the expression of a desire for changes in systems of reciprocity. Existing systems will, and are, fighting it. But eventually, they will change. We just don’t know how, or when. Until then, don’t expect social interest in crypto to fade.
