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Bitcoin: The get rich scheme enabled by mystery, confusion and fomo

Academics hate it, investors love it, and everyone else is confused by it. Seemingly, Bitcoin is here to stay. But how did it become the thing?

 

 

Bitcoin is the latest in a line of get-rich-quick schemes where the majority were not quick enough to get rich. We logically stalled through confusion, a lack of understanding or the suspicion that we’d be ripped off. It’s a standard that has a long-running place in the human experience, as I’m absolutely sure the first dust-swept loon who excitedly careened into a dour saloon, extolling the value of the large lump of yellow rock under his arm was not taken seriously.

As a result, the internet is awash with gleeful schadenfreude, tales of the possibly rich in an alternate timeline, stuck here because they threw out something that had no value back in 2009. The problem with bitcoin is that it is genius, and because of that, most of us have not a clue.

 

 

According to the standard definition, Bitcoin a string of computer code. New bitcoins can be created — up to an agreed limit. You discover the glinting things through a computer that solves the puzzles that keep them hidden.

What makes it more opaque are the conversations that are being had around it. The meteoric rise of bitcoin is partially enabled by the trivia that accompanies it. Did you know that it uses more power than the Republic of Ireland? Don’t ask how. We don’t know. The bitcoin experience even involves a murky backstory, as many attribute the cryptocurrency to Mr Nakamoto, a man who seems to be either Japanese, Australian, or fictional. Bitcoin is also a metaphor for the destruction of modern-day America, as economist Robert Shiller illustrated to Quartz: “Somehow bitcoin fits into that and it gives a sense of empowerment: I understand what’s happening! I can speculate and I can be rich from understanding this! That kind of is a solution to the fundamental angst.”

Somehow is the operative term.

Joseph Stiglitz, the Nobel Prize-winning US economist, has said it ought to be outlawed. “Bitcoin is successful only because of its potential for circumvention, lack of oversight…it doesn’t serve any socially useful function.”

In the storied English of Stiglitz, we fear it, because it cannot be contained, defined or valued in any way. However, in the English of a German, Friedrich Nietzche surmised that as soon as you define something, it loses all power. I’d argue that it’s inherent lack of value places it as a perfect metaphor for 2017. A perfect investment risk for an entire generation flying by the seat of their pants while nervously glancing over their shoulder.

Strangely, like everything in the modern experience, it seems to be a kitsch 90s throwback.

“There are massive similarities between the dotcom bubble and bitcoin,” says Clare Nicholls, senior partner at Invenio Corporate Finance. “The dotcom bubble was driven largely by ‘fear of missing out’. Many people acted without really understanding what they were doing or the real truth behind it. As a result, prices skyrocketed and now, over a decade later, we are looking at the same volatile situation.”

With the value of a single bitcoin set to be around $US40,000 by the end of 2018, it behoves one to get onboard before the FOMO washes over you. Who knows, your grandchildren (which you currently cannot afford) may indeed ask you in the Auburn summers to come, what did Pep-Pep do during the great bitcoin firesale of 2017?

 

Hmm?

 

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