Long read: The cruelty of crypto

Debates on crypto are much like political debates where neither side is likely to see any merit in the opposing arguments. We have no intention to stir up another debate – the title of the article might be misleading as the subject isn’t about crypto alone but also includes the meme stock mania or the futures and options trading craze we are seeing in India today. Basically, the lure of the get-rich-quick path to a brighter future. Rachel O’Dwyer, the author of Tokens: The Future of Money in the Age of the Platform begins this article with a dig at Silicon valley:

“ Everything is shot through with a hubris called ‘the Californian ideology’, a name given to the toxic blend of individualism, libertarianism and technological determinism that would come to be associated with the politics of men like Peter Thiel, Elon Musk and the Winklevoss twins. The ideology’s adherents believed in personal autonomy and the wisdom of the free market and, on the more radical end of the spectrum, in total anarchy, life extension and space colonisation. What did they share? Maybe it’s a sense that, with enough money and processing power, you could leave the world and all its problems behind, bank the future, live forever, overcome death itself.”

Whilst crypto has made a comeback of sorts this year, it did leave a hole in many an unassuming pocket after the peak of 2021:

“In the early 2010s, bitcoin was predominantly bought and owned by affluent white men in tech and investment circles. But, by 2021, advocates were shilling the token as a pathway to generational wealth for Black Americans. Historically, Black Americans have struggled to build intergenerational wealth. Centuries of economic practices, from slavery to redlining, made it almost impossible to hold property, to own homes, or to build and transfer wealth from generation to generation. To this day, Black Americans still have the lowest rate of home ownership of any racial group in the United States. These rates have only declined since the financial crash, falling as low in 2019 as they were in the early 1960s, when race-based financial discrimination was still legal.

…In the absence of a clear pathway to the good life, crypto was framed as a way out of financial distress. Phrases like ‘financial inclusion’ and ‘economic empowerment’ were parried by unofficial Black ambassadors, among them JayZ and Mike Tyson. The phrase ‘bitcoin investor’ might still conjure someone from a Brett Easton Ellis novel: white, monied, functionally sociopathic, but the accounts told a different story; by 2021, Black Americans were more likely to hold cryptocurrency than white investors were. Young people, Black folk, the poor and the indebted were all scrambling into the latest scheme, in the hope of winning a secure future. Buying in at the height of the market, most were left holding the bag. Crypto did not level the playing field. It exposed the vulnerable to fraud and scams. It offset risk on to the poorest in society, all while paying lip service to a dream.”

The author refers to a concept of cruel optimism to explain this:

“In 2010, the cultural theorist Lauren Berlant wrote of ‘cruel optimism’, a desire that keeps us attached to something that ultimately harms us. Cruel optimism takes different forms, from desires for romantic love to upward mobility. At the centre of it all are dreams of something we call ‘the good life’, the fantasies we recruit to make sense of the world, the stories we tell about how we and the world around us should ‘add up to something’. We seek comfort in tales of hard work rewarded, of bullies beaten, of winning the system. Why, Berlant asks, do people stay attached to these fantasies despite all evidence to the contrary? And ‘what happens’, as in the financial crash and, later, the pandemic, ‘when those fantasies start to fray?’”

The author turns to the award-winning Netflix series ‘Beef’ to drive home the point as the pandemic lured in retail investors to trading. She writes about a conversation in the series between the protagonist Danny and his younger brother:

“Paul’s plan is ‘to become a crypto millionaire and travel the world with [his] bros’. All he needs is three 10x trades. He makes it sound so simple, the figures almost tripping over themselves as they leave his mouth: ‘1K to 10K, 10K to a 100, 100 to a million. Boom.’ …‘That’s not a plan. You’re just saying higher numbers,’ Danny splutters. Paul parries his brother’s impotent rage with a kind of relentless optimism. It’s not the end of the good life, but a different pathway to the mansion in southern California, to early retirement, world travel, to building your parents a retirement home, to making them proud.

…Crypto and meme stocks symbolised, for many, a spot in the lifeboats. It was ‘Lambos or food stamps!’ Millennials and Gen Zs, in debt and with no chance of financing their futures through so-called ‘legitimate’ channels, were investing in high-risk, high-return stocks for the chance to win a down payment.”

She concludes by saying:
“Financial markets are no longer a space where investors allocate capital to businesses to grow a profit. It’s all about gambling on vibes in the gulf left by financial and social and political systems in total freefall. Nihilistic vibes, desperate vibes, hopeless vibes. The market is a giant lottery in search of the prize of security, gambling for a spot in the lifeboats. Of course, financial markets have been divorced from the so-called ‘real’ economy since the 1970s. But, maybe, in the era of post-truth and political apathy, what is new is an acceleration of these sensations, a total sense that nothing matters anymore. Hard work doesn’t matter. Good sense doesn’t matter, and neither do good bets or doing all the right things.”

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