Opinion | Crashing Crypto: Is This Time Different? - The New York Times
By now, we’ve all heard of them, but what exactly are cryptocurrencies? Many people — including, I fear, many people who have invested in them — probably still don’t fully understand them. Saying that they’re digital assets doesn’t really get at it. My bank account, which I mainly reach online, is also a digital asset, for all practical purposes.
What’s distinctive about cryptocurrencies is how ownership is established. I own the money in my bank account because the law says I do, and the bank enforces that legal claim by requiring, one way or another, that I prove that I am, in fact, me. Ownership of a crypto asset is established through what’s known as the blockchain, an encrypted (hence the name) digital record of all previous transfers of ownership that supposedly obviates the need for an external party, such as a bank, to validate a claim.
In the past, cryptocurrencies kept going up by attracting an ever-growing range of investors. Crypto was once held by a small clique that often had the feel of a cult, motivated in part by a combination of libertarian ideology and fascination with the clever use of technology. Over time, rising crypto prices drew in large numbers of additional investors and some big Wall Street money.
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And in the past year or so, crypto marketing has gone really mainstream, with endorsements from celebrities — including Matt Damon, Kim Kardashian and Mike Tyson — not to mention political figures like Mayor Eric Adams of New York and the (unsuccessful) Republican Senate candidate Josh Mandel, who declared his intention to make Ohio “pro-God, pro-family, pro-Bitcoin.” Given all this, it’s hard to see who else there might be to recruit into crypto investing.
One disturbing aspect of this marketing push, by the way, is that those who bought cryptocurrencies relatively recently — and have therefore lost a lot of money in the crypto crash — probably consist disproportionately of the kind of people most likely to be influenced by celebrity endorsements. That is, they are probably poorer and less sophisticated than the average investor and badly positioned to handle the losses they’ve taken over the past few months.
As it is, cryptocurrencies play almost no role in economic transactions other than speculation in crypto markets themselves. And if your answer is “give it time,” you should bear in mind that Bitcoin has been around since 2009, which makes it ancient by tech standards; Apple introduced the iPad in 2010. If crypto was going to replace conventional money as a medium of exchange — a means of payment — surely we should have seen some signs of that happening by now. Just try paying for your groceries or other everyday goods using Bitcoin. It’s nearly impossible.
And then there’s El Salvador, which tried to force the process by making Bitcoin legal tender and heavily promoting and subsidizing its use, in an attempt to make it a true medium of exchange. All indications are that the experiment has been an abject failure.