As someone who has written about crypto on and off for more than six years, I have become used to the endless armies of zealots and trolls who harangue me every time I write anything vaguely critical of bitcoin. I consider such goading annoying but part of the job, and I tend to ignore it.
But recently I’ve been struck by one increasingly common jibe, because it inadvertently undermines the supposedly altruistic aims of the bitcoin brigade: “Have Fun Staying Poor.”
This meme has become so common in cryptoland that a song has been written in its honour; you can even buy T-shirts emblazoned with the phrase. The taunt is directed at so-called “no-coiners” like me whenever we express scepticism. Whether or not our criticism is warranted is irrelevant. The thinking is that because the price is so obviously going to keep going up forever, those of us who don’t buy into it are going to be mired in poverty while those who invested get filthy rich.
If such a system sounds reminiscent of a Ponzi scheme, that’s because it is. Although some of the traditional characteristics — such as a head or central administrator or the existence of cash transfers — are lacking in bitcoin, others are not. Those who get in at the start must continuously draw in new believers to keep the whole thing going. Many of them market themselves as “crypto experts”, pushing the currencies as a solution to a host of financial and economic issues they often have no expertise in. As prominent bitcoiner Antony “Pomp” Pompliano unashamedly tweeted to his almost 1m followers recently, “Every bull market has to indoctrinate the new class of crypto enthusiasts”.
“Technically it doesn’t work quite like a Ponzi, but you get the same net result,” says Martin Walker, director of banking and finance at the Center For Evidence-Based Management. “The brilliance of the whole crypto scam is that you don’t actually have to generate any income to pay anyone, so you don’t run out of money because you’re making people believe in ‘number go up’.”
What the bitcoiners never explain — and some don’t seem to quite understand — is that this is a zero-sum game: we can’t all get rich from it. But if you listen to “expert commentary”, there is no acknowledgment of this, nor of the way the system is skewed to enrich those at the top of the pile. Quite the opposite, in fact — analysis is always about “democratising finance”, “increasing economic freedom”, or bringing the fight to the evil central bankers intent on inflating away the value of our money.
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When El Salvador recently announced that it was making bitcoin legal tender, my inbox was flooded with analysis on how this would increase financial inclusion, foster economic growth and, of course, boost the price of bitcoin.
The crypto experts filling up my inbox never seem to mention the fact that more than 89 per cent of the 21m bitcoins that will ever exist have already been created, or “mined”, and are sitting in other people’s wallets ready to be flipped to a newcomer for a profit. Nor do they bother with the huge wealth disparity that already exists in crypto — a recent report by Glassnode found that 2 per cent of “network entities” control almost three-quarters of all bitcoin.
“Inequality in bitcoin is far worse than in any fiat currency, and as it is independent of taxation, there is no means of redistributing it,” says Frances Coppola, a finance and economics commentator.
So why does the commentary miss all this? The problem is that “crypto experts” have usually garnered their “expertise” by having skin in the game. It is rare to find one who is not a crypto investor, and who therefore is not financially motivated to keep pumping up the price.
Pompliano reckons this is a reason to listen to such voices, recently tweeting that “you should always ignore people who have no skin in the game”. But he is just the type of “expert” that should not be trusted: if bitcoin ever became widely adopted, it would require a great many more people to buy it from those who already own it, turning longtime holders like him into the new super-rich global elite.
Fortunately for all of us, there are so many other problems with bitcoin — not least its thousands of rivals — that this is never going to happen.