Last month, cryptocurrency values fell by nearly $1 trillion as Bitcoin, the world’s most valued cryptocurrency, dropped more than 50% from its all-time high of $64,800 on April 14.
Eretheum, the second-most valued cryptocurrency, fell by nearly 30% while Dogecoin dropped to $0.25 from a peak of $0.73 on May 8.
The mayhem played against a backdrop of both passionate and distraught crypto investors on Twitter. Through all the disarray, a popular sentiment occurred amongst users, one in which @Uwnayna exemplified best:
“Nahhh but why were people investing money they couldn’t afford to lose in Crypto????”
Thus tweets from amateur investors that expressed frustration with the market were quickly shot down by others citing the long-term nature of cryptocurrency investment.
Most notably, a popular reply to Elon Musk’s tweet that morning which read “Tesla has diamond hands,” user @SisterHuncho wrote:
“Lost all my family savings, my husband is about to leave me and take the kids. I have lost my job and I am about to be homeless. Thank you elon”
Accordingly, the most viral responses to this reply argued Musk was not to blame for this person’s predicament given the purportedly volatile nature of cryptocurrency.
Now, as I witnessed the chaos unfold on my timeline from an outsider’s perspective, I became curious about who exactly invests in crypto and why they do it. More specifically, I wondered whether young people and college students, in particular, were captivated by digital currency.
While embarking on this investigation, I learned one thing for certain: most students do not care for it. And the overwhelming reason is because of what it represents.
Firstly, let’s briefly (and very simply) break down what Bitcoin and other variants of cryptocurrency exactly are.
What is cryptocurrency?
Cryptocurrency is digital money supported by “blockchain” technology which records “blocks” of all transactions made with cryptocurrency to form a “chain” or database of information. It is essentially a digitized checkbook, purposefully available to all who trade and engage with cryptocurrency.
Cryptocurrency is typically secured and distributed through a verification process known as “mining” in which computers with intensive computational power solve puzzles associated with each transaction.
Because no one person or central authority (i.e. the United States government) foresees maintenance over the blockchain, it is a completely decentralized asset.
Similar to stocks and bonds, cryptocurrency can be purchased by anyone and with relative ease through the use of mobile applications such as Robinhood and Coinbase.
Bitcoin is the most popular and highly valued cryptocurrency, however “altcoins” such as Ethereum and, most recently, Dogecoin, are rising in popularity and also available for people to purchase.
Why investing in cryptocurrency is so weird
Cryptocurrency is often a strange concept for people to wrap their brains around because of its abstract and technological nature.
I spoke to Chad Hamner, recent UC Berkeley graduate and Economics and Business Administration major, to gain an investor’s perspective on the market.
Hamner is the creator of Tatiscoin–a parody cryptocurrency in homage to the San Diego Padre Fernando Tatis Jr–to which I knew he would provide some much needed insight.
As a digital asset, much of cryptocurrency’s “real” value relies on its technical structure and engineering design, Hamner explained. Because of this, the worthiness of one cryptocurrency over another mostly depends on its technological superiority, all of which are “concepts that require a degree in computer science, math, or engineering to fully understand.”
Accordingly, most cryptocurrency investors are without the technical knowledge to comprehend its scope, however they do not necessarily need to fully grasp these concepts to be an informed investor, Hamner tells me. Yet, this unawareness means the market becomes primarily driven by speculation and crowd psychology rather than engineering composition.
To that end, as Hamner noted, “if you are just into crypto for the trading aspect then really all you’re doing is trading sentiment, which any monkey with a Twitter account can attempt to analyze.”
This explains last Wednesday’s crypto-collapse and the chaotic Twitter interactions that followed–all symptoms of a market entirely reliant upon sentiment, left a whim to the disordered news cycle and Elon Musk’s mood for the day.
Accordingly, from the outside looking in, cryptocurrency can represent a dystopian future behind a wall of inaccessible language and hypercapitalism.
For the planet, by the people
Dominick Sullivan, recent University of Redlands graduate and Public Policy and Environmental Science major, cited the technical barrier behind understanding cryptocurrency as a primary reason for not being particularly interested in it.
“Maybe if there was a more accessible way to learn about it, it could be a more fun and inviting conversation,” he wrote via email.
Furthermore, Sullivan expressed concerns over the culture which often permeates discussion of financial markets–i.e. themes of individualism, egotism, and self-preservation–as a “turnoff” and potential means for a future in which cryptocurrency exacerbates pre-existing wealth disparities.
“Introducing a new method of acquiring wealth makes me cautious because people always find a way to exploit others to gain financial capital.”
This observation is an interesting one, and even evidenced in the way individual investors react to changes in the cryptocurrency market on Twitter: Don’t invest what you can’t afford to lose. All of which initiates a class divide between those who can and cannot sustain financial losses.
Cryptocurrency, then, is a piece a part of a long and complicated history of financial markets and their capacity to both build and bereave people of wealth.
Black Americans, for example, have historically been restricted from acquiring assets through various discriminatory practices such as redlining. This has manifested in present-day consequences, most notably through immense wealth disparities between the average Black and white household (the former typically holding $13 per family for every $100 held by the latter).
Accordingly, Black families invest at roughly half the rate of white families out of fear and distrust in financial institutions due to their racist legacies, which in turn further perpetuates the wealth gap.
The appeal of Bitcoin and its subsidiaries then dissipates for many Black people and students conscious of this history, no longer an exciting technology with the potential to change the future but an instrument of further class oppression; acting not as an extension of wealth but of deprivation.
Exploration into blockchain technology’s harmful environmental impacts doesn’t help cryptocurrency’s case, either.
Shelby Lindsley, Studio Art major and rising senior at the University of La Verne, cites environmental costs as her main gripe against cryptocurrency upon learning about non-fungible tokens (NFTs) in lieu of their recent rise in the art community.
Cryptocurrency damages the environment because the computers required to create and secure Bitcoin use immense amounts of energy to maintain the ever-expanding blockchain. Bitcoin operations across the world now consume as much energy as the entire state of Sweden per year, sending millions of metric tons of carbon emissions into the atmosphere.
Using this amount of energy becomes unjustifiable for many, let alone unsustainable amidst a global climate crisis, particularly when global warming disproportionately affects low-income countries who are not mining Bitcoin to nearly the same degree.
The scope of casualties involved from this seemingly harmless digital currency then widens, depicting a picture of abundance generated for the minority at the expense of wealth and environmental protection for the majority.
If both exploitative and toxic for the environment, then what is cryptocurrency good for?
A shift in perspective
As a decentralized system of exchange, Bitcoin can represent a viable alternative to the institutions and cultural influence the dollar and other fiat currencies signify.
Through conversation via email, Nathaniel Cline, professor of Economics at the University of Redlands, noted that mistrust in the US government, Federal Reserve, and other financial institutions can be “attractive to people who find themselves disillusioned with what they see as centers of established power.”
Bitcoin is to some not just a speculative asset to enrich one’s portfolio, but very much the future and a direct competitor to the dollar.
Blockchain technology is revolutionary precisely because it does not rely on banks or the government to create, verify, and keep account of monetary transactions. Instead, through the use of advanced computing power, it’s groups of people across the world who maintain anyone’s given Bitcoin balance. And for some, there’s power in that.
Satoshi Nakamoto, the pseudonym used for the unidentified lead developer of Bitcoin, expressed skepticism for financial institutions.
In a blog post from 2009 they wrote, “Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts.”
Under this context, cryptocurrency can mean liberation rather than exploitation; freedom from institutions otherwise known to be “too big to fail.”
Well, here’s where they can collapse.
All things to consider
Cryptocurrency is multifaceted in the ways it is an antithesis of itself, holding dual meanings that can both be true at the same time. Disillusionment in capitalism and the world economy can lead to either disdain or faith in it, all dependent upon whether one believes it as an extension or break from the status quo.
If your friends are considering investing in Bitcoin it can be enriching to ask them why. It’ll reveal a great deal about how they interpret the world and what they believe the future ought or could be.
In general, however, I think considering the reverberating effects of cryptocurrency and how it fits into a broader historical context is a healthy question worth asking.
As a participant, does one have the potential to exercise harm, even if only in a hidden and passive manner? And if so, is the damage really worth it?
