A Crypto Bubble Ready to Burst
Silicon Valley’s leaders fashion themselves as titans of industry, but what they’re really building is a golden age of grift.
Of the big industries that underwrote the Trump campaign, two stood out as being particularly despicable: Dirty energy and cryptocurrency.
Roughly $445 million from dirty energy went to elect Donald Trump and MAGA voices in the puppet congress. The candidate asked for one billion in donations and, with dark money included, probably got it.
$96 million was spent on behalf of Trump
$243 million was spent to lobby the Congress, where the Senate is approving unqualified people to cabinet positions. Now that the Department of Defense will be run by a Fox weekend host, only Tulsi Gabbard and RFKjr face any speed bumps along the way toward decisions likely to kill untold numbers of humans around the world.
$80 million was spent in support of MAGA and opposing efforts to mitigate climate change.
$25 million to down ballot races including Congresscritter, Senators, and Governors.
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Corporate PACs related to the crypto business coughed up $245 million for Trump. That dollar figure doesn’t include many of the tech titans like Elon Musk.
I think lots of people understand what dirty energy’s been doing for the past half century; paying off a gaggle of so-called experts to dispute scientists alarmed at climate change driven by human endeavors, while using a PR campaign copied from the tobacco industry.
The business of digital currency moving through an encrypted network to execute, verify, and record transactions, isn’t so easily explained.
The technology involved in making currency a digital commodity is revolutionary, and could someday be the central pillar of world-wide commerce. The people who want currency to become a digital commodity, on the other hand, are mostly scummy.
‘Pump and dump’ is the game played, where values are inflated through ghost trades and hype, and late-coming buyers are stuck with a near worthless imaginary item. These games are open to hustlers with a modicum of (usually outsourced) technical ability and the ability to imply charisma.
Since anybody can invent a currency, there are now more than ten thousand cryptocurrencies world wide. Most of them are worthless units called coins, which come in many guises. Meme coins such as Dogecoin - named after a Japanese dog species - are an infamous example, started as a joke by two Reddit users who’d never met each other.
Dogecoin's value, along with other cryptocurrencies has soared as traders bet Elon Musk's proximity to the President will further boost the meme-based cryptocurrency.
Donald Trump minted a digital representation of a coin just prior to his inauguration and pumped increases in value amounting to tens of millions of dollars. Melania’s people looked at it and said, why not us? The minister who presided at the inauguration released his own coin.
In the financial world, these things are known as “shitcoins.” They represent wealth accrual completely divorced from any kind of value creation… a way to get rich without having to contribute anything or make anyone's life any better. All you have to do is convince other people that they'll get rich too, if they buy your made-up thing and extend the absurd game that you're playing. Then comes the “pump and dump.”
Trump is following through on his campaign promises to make overhauling crypto policy one of his administration's priorities, ordering the creation of a cryptocurrency working group tasked with proposing new regulations and exploring the creation of a national cryptocurrency stockpile.
There is a whole world of fantastical ideas surrounding the use of digital assets. The most prominent early adopters of crypto have been hackers (wanting payment for system intrusions) and drug dealers. The days of the DEA inviting the media in to view stacks of ill-gotten currency are over.
While blockchains promise a decentralized future, its ecosystem has become increasingly centered around ultra-wealthy figures with the capability of projecting charisma and reputations of being geniuses.
The extreme idea of destroying central governance institutions in favor of separate and not equal mini utopias has become a shared vision as their ‘move fast and break things’ philosophy has run into real life consequences.
Most Americans don’t know a lot about crypto (and the various entities connected to it), and what they do know they don’t like.
Here’s a snip from the Federal Trade Commission’s Consumer Advice, which will no doubt disappear once the MAGAts finish with eliminating “woke”:
Because cryptocurrency exists only online, there are important differences between cryptocurrency and traditional currency, like U.S. dollars.
Cryptocurrency accounts are not backed by a government. Cryptocurrency held in accounts is not insured by a government like U.S. dollars deposited into an FDIC insured bank account. If something happens to your account or cryptocurrency funds — for example, the company that provides storage for your wallet goes out of business or is hacked — the government has no obligation to step in and help get your money back.
Cryptocurrency values change constantly. The value of a cryptocurrency can change rapidly, even changing by the hour. And the amount of the change can be significant. It depends on many factors, including supply and demand. Cryptocurrencies tend to be more volatile than more traditional investments, such as stocks and bonds. An investment that’s worth thousands of dollars today might be worth only hundreds tomorrow. And, if the value goes down, there’s no guarantee it will go up again.
A plurality of people see some technological re-imagining of money as likely in the near future, and they’re right, as financial transactions are increasingly handled by data transfers between entities.
We really don’t want venture capitalist David Sacks (the administration’s crypto czar) in charge of whatever Swiss-cheese type regulations get foisted upon us, but that’s what’s coming.
The ultimate destabilizing act for the United States would be the adoption/or storage of crypto assets by the government. Real American dollars will flow to the already wealthy holders of those assets, and when (not if) the market crashes, the government will be broken. Libertarian nutjobs will celebrate their “freedom” while ordinary citizens dine in soup kitchens.
The encryption at the root of cyber currencies is ultimately its weakness. Quantum computing can make encryption as we know it worthless, and it’s not just the crypto currency folks who should be afraid. The US government has figured out some post-quantum cryptography, but it’s so complicated that an all-out effort ordered by President Biden in 2022 is estimated to be complete by 2035. Make no mistake, everything with the word quantum has just as much potential as the unlimited energy that could be available through nuclear fusion.
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In Welcome to the era of gangster tech regulation at The Verge, Elizabeth Lopatto has a grim view of what to expect:
I suppose I have to explain why this makes the US a shittier place to live, given the “savvy” cynicism I’ve seen about how it’s all rotten here already. Tech companies, padding their bottom lines, have made their experiences worse, a phenomenon so widespread and well-recognized that now there’s slang for it. Whether the scandals are scams, child predation, worker exploitation, or violations of user privacy — pick your poison — Trump has offered tech a way to buy itself out of consequences. That makes life tangibly worse for everyone who isn’t a billionaire.
There are those who will say that this is good — that the corruption is happening in the open instead of the shadows. But public, open corruption allows even more rottenness to fester in secret. Consider all the strongman governments; besides their advances in bribery, what did they innovate? Silicon Valley’s leaders fashion themselves as titans of industry, but what they’re really building is a golden age of grift.
Remember back in the days when Bush & company were selling the idea of 401 K savings accounts as an alternative to Social Security? Most people thought that was a bad idea, and it still is, since the only guarantee that comes with it are the transaction fees charged. Crypto is the same sort of thing in that when the market crashes, investors get screwed.
If there is one thing we ought to know about “the market” is that, without reasonable oversight, there is no bottom, especially when things have inflated values. The one trillion dollars lost in stocks associated with artificial intelligence on Monday is the latest example.
For the Trump administration, the market is ultimately a description of the ways wages and home equity from working people are transformed into wealth for the already wealthy.