Revisiting bitcoin
Originally published March 2018
I wonder how Maria Lomeli is doing.
You may not realize it but today marks three and a half months since the height of the bitcoin bubble. On December 16th, the cryptocurrency hit its peak price with one bitcoin worth more than $19,300. A month later, on January 13th, the New York Times published an article titled “Everyone is Getting Hilariously Rich and You’re Not“. It reads like a manifesto to those who believe in the value of the currency. It’s also led to some personal disillusionment.
Cryptocurrency originated as an experiment in ledger decentralization. Was there a way to build a decentralized recordkeeping system that could still be trusted by all its users? In 2009, bitcoin was created as an experiment to answer this question. Developers worked to enhance the idea over the years, but recently, a fraction has grown critical of the varying agendas within the community. In fact, the developer Mike Hearn even wrote this widely circulated Medium post announcing Bitcoin as a “failed” experiment. As skepticism grew, recent enthusiasm was spurred by individuals looking to profit off the invention.
In the New York Times piece, the author profiles various people aiming to make money off the cryptocurrency craze. Telling details are provided if you look closely. These individuals, almost all male, are committed enough to base their entire life around cryptocurrency. They’re technology-savvy and imagine a new world order. Many met through the online community and have known each other for some time. Mostly, they’re young enough to afford to take risks.
A number of these proponents were early adopters who prospered from the world’s sudden interest. I imagine they’re benefitting quite heavily from the recent media coverage.
Of course, late arrivals are looking to make life-changing money too, aren’t they? Although not mentioned in the article, cryptocurrency has been partially tainted with its connotation with pump-and-dump groups which do little to deter fears of unpredictability. Participation in these groups require an upfront fee. Once a member, individuals gain access to information of carefully planned market spikes. The closer you are to the center of knowledge the more profitable the information edge is. Later entrants into these pump-and-dump groups, bridging the chasm between the group’s core and general public, benefit less so. This system divides investors into castes: If you don’t have access, then you’re on the outside looking in.
The article concludes with a story about an individual, Maria Lomeli, who is attending the annual San Francisco Bitcoin Meetup Party. Ms. Lomeli is different than our millennials in one significant way: She is 56-year old. A housekeeper by trade, she appears just as excited as others. After an initial investment yielded a positive return, she chose to ignore the advice of her children and entrusted another $10,000 of her savings alongside everyone else. Her defining quote? “Something is telling me I can trust this generation. My instinct is telling me this is the future.”
Maybe this is the future. I won’t question the potential of cryptocurrency or blockchain, but it’s equally important to remember the very real consequences bubbles cause.
When Ms. Lomeli staked her savings, BTC was worth over $15,000, driven by the excitement of our aforementioned youth. It fell under $7,000 earlier this week.
When will that future come?
I think about her often.