By Adhirath Sethi
Last December, when Bitcoin was at its peak, people ridiculed me for investing in shares and gold. Fast forward to November 2018. Suddenly my minus 23 per cent returns on the stock market don’t seem like the worst thing anymore. Bitcoin’s barely clinging to $4,000 – a nearly 80 per cent nosedive since last year.
We all bookmark our lives using landmark events. Where were you during 9/11? Or when Sachin made his 100th 100? Or when Mithun Da first busted a move? It’s fun to reminisce, and useful in case some old murder case gets reopened and they ask you for an alibi.
I remember December 2017. It may not be the most consequential month to most, but let’s not forget that this was when Bitcoin was at its peak. Maybe even more popular than Mithun at his peak. I was sitting in a room being ridiculed by a group of people. They had just asked me where I had put my savings and I, naïve as an hour-old rabbit, confidently stated, “Shares… and gold.”
Oh, the humanity! Someone asked if I still used a Nokia flip phone, another asked if I still collected Tazos, yet another used that “hilarious” joke where they say “1999 called and wants its portfolio back”. This last one was dumb because 1999’s portfolio would have been mainly stocks that imploded in the dotcom bust. Why would anyone want that back? But there was nothing I could do but sit there and take it, because it’s a rule at our Gambler’s Anonymous meetings that you can’t just up and leave early.
Not only was I then schooled on Bitcoin and told that it was the only safe haven for wealth preservation, but some idiot kept screaming “blockchain”, every 20 seconds and everyone nodded in unison.
The fact remains that even with all the logic, stopgaps, and firewalls that these systems claim they have, there is ultimately someone who is responsible for its creation.
That evening, I did what any rational investor looking for 5X returns over a three-month period would do – I googled Bitcoin. It didn’t take long to figure out that no matter how long I tried, I would not figure this out. It made no sense. They were talking about some kind of “mine” and algorithms and like in my GA meeting, this “blockchain” word kept jumping out at me.
But the thing that saddened me the most, was that all those people who made fun of me had invested in Bitcoin when it was at $10,000 and now it was over twice that value. It’s very disheartening when people with more money than you make fun of you for not minting money.
Fast forward to November 2018. How are my shares doing, you ask? They’ve been battered; thanks for your concern. What about gold? Nothing much to speak of. But what’s that silence I hear over the internet? Could it be that the Bitcoin bravado has quelled somewhat? Suddenly my minus 23 per cent returns on the stock market don’t seem like the worst thing anymore, do they? Bitcoin’s barely clinging to $4,000 – a nearly 80 per cent nosedive since last year.
I get that three months down the line I could have egg on my face again. That’s just the nature of the world we’re in, especially when poultry farming is suffering from oversupply because of all the vegans (#ChickensAreFriendsNotFood). It’s perfectly plausible that by next November, Bitcoin could rise from the ashes and punch me in the head for trying to make fun of it. And while I’m happy to accept such a comeback, the fundamental issues with Bitcoin – and indeed all cryptocurrencies today – are still going to pervade.
For starters: there’s way too many of them. When my GA friends and I sneak off to a horse race, we have but eight or nine to choose from. I like those odds. As of August 2018, there are over 1,600 cryptocurrencies in the world. Even if you only consider the really popular ones – such as Bitcoin, Ethereum, or Ripple – there are still dozens, each competing to be the last currency standing. If I’m splitting my money seven ways like Voldemort’s soul, there needs to be some guarantee that I’ll have at least 7X returns on the one Horcrux that survives.
Then there’s the issue of oversight. Say what you will about regular currency, but at least there is a central bank being held accountable for any screw ups. Proponents of crypto keep trying to convince us that the system works because it’s “decentralised”. Yet there are reports of hacks every week. Also, I’m not sure I buy this whole altruism angle that these crypto-millennials keep trying to sell. The fact remains that even with all the logic, stopgaps, and firewalls that these systems claim they have, there is ultimately someone who is responsible for its creation. And as Ben Affleck said in that terrible movie that helped destroy both my innocence and the DC universe, “If we believe there’s even a one per cent chance that he is our enemy we have to take it as an absolute certainty.” Dramatic? Sure. But not untrue.
And finally – blockchain. Surprisingly, blockchain is the only part of all this I’m actually OK with. They say it’s the way of the future, but they also said that about Google Glass, so let’s not get ahead of ourselves. It is not, as some people believe, going to somehow solve global warming, destroy anti-vaxxers, and bring back the ’60s. But at the very least, blockchain offers some transparency in a world where fake news and gross misinformation all contribute to make transactions more and more murky.
The funny thing about the value of currency is that it’s all made up. It only works if we all agree it has value. We’ve been told this time and again, yet we still take it for granted. I can only pay my bookie with ₹2000 notes because he can then use those notes to pay the people who would break my legs if I didn’t pay him. It’s a glorious carousel of financial dependencies that will continue to function as long as our PM doesn’t drop another DeMo bomb. The fact that crypto was created and attempts to survive within a world where perceptions change faster than Mithun’s dance moves is possibly the reason its finding it so hard to stay cool. You know… just like Mithun.