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Editor’s Letter: April 2018

Can We Now Dismiss Cryptocurrencies?

Recently, I met with some young entrepreneurs in the cryptocurrency space. Their pitch was a kind of robo-like “platform” that would allow advisors, and investors to bring their crypto holdings together with their non-crypto assets, like stocks and bonds, into a total portfolio management and reporting tool. They were soon to launch their own Initial Coin Offering, bringing yet another token of exchange into the world. It would join some 1,500 other cryptocurrencies currently in “the market.” (By market, we mean you can trade some actual cash for the digital tokens.)

They were smart and enthusiastic, and made a good case, but even after a lengthy conversation, I still couldn’t figure out how to jibe my understanding of cryptocurrency as an investment with cryptocurrency as a medium of exchange.

An investment is a claim on future revenue. Is that anywhere to be found in the crypto space? What future revenue is the crypto holder entitled to? It seems more akin to gold—a limited supply and a capricious store of value. You can’t buy anything with gold, and its price is set only by what the next person is willing to pay for it.

Believers in crypto, like believers in gold, point out that fiat currency is so easily manipulated by governments that an alternative is needed for a true, unimpeded global exchange. But crypto (like gold) seems to be a poor substitute. Gold’s detractors point out that “it’s nothing but a rock”—a rock that increases in value alongside fear about inflation, the value of the dollar, the state of the markets and the underlying economy.

Do the hefty valuations of some crypto coins also point to a fear that traditional markets are built on less-than-stable foundations? Most economic indicators are good, yet there seems to be an unease; no single narrative is dominating the story. Trump’s tariffs, Facebook’s troubles, the rise of nationalism around the globe—it all makes the idea of a clean, logical, transparent digital marketplace, above the human fray, appealing.

That’s the utopian vision that drove Jack Dorsey, the consummate Silicon Valley bro and CEO of Twitter, to recently tell The Times that in 10 years, bitcoin will be the world’s single currency.

But at the same time, his company is reportedly considering banning some cryptocurrency marketing on the platform, following similar stands by Facebook and Google. I’m guessing Twitter executives are basing the decision on a sense of caution as the crypto world is rife with fraud and Ponzi-like schemes. It’s risky to promote it, particularly at a time when people are discovering social media platforms aren’t idealistic ways to connect the world, but networks easily abused by those who want to profit from misinforming the public. 

Digital utopian fantasies are all well and good, but it’s inevitable they will crash up against human reality. I want to believe in the crypto space. But I suspect if I did, it would only disappoint me.


David Armstrong


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