The ticking bomb of crypto-fascism
Predicting impending social and political disasters is a delicate business because most of the exciting things in history have not happened predictably. You can try to draw historical parallels based on general economic or cultural trends. In America, in 2022, we have a vicious and spiraling culture war combined with a huge asset price bubble fueled by two years of stimulus money, all resting on an incredibly weak, pandemic-ridden real economy. If you think the Angry White Men were scary during the Trump years, just wait for the crypto bubble to burst.
Let’s think this through. The basis for everything that is happening now is some sort of late capitalist nihilistic politics fueled purely by cultural wars – an almost primitive escape from rationality fueled by half a century of increasing inequality and fragile trust in ineffective public institutions. The American dream is dead: children are no longer reliably better off than their parents. The dream of an income-income household is over. The gig economy emerged in its place, bringing down student debt, union deaths, and general precariousness. The rich are unimaginably richer, and everyone else is turning their wheels. The Republicans’ response was the Culture Wars, rather than actually redistributing wealth. This was ironically effective, because the kind of sane institutions that would keep culture war politics from becoming so powerful are the very institutions that are withering. Technological changes and the atomization of the mainstream media have intensified our division into warring political camps, identity-based tribes, who further radicalize electoral politics and are themselves radicalized in a non-virtuous cycle.
That is the soil of America today. And sprout from it in the spring 2020, was the pandemic. The economy crashed momentarily, and there was a panic, and then there was a lot of government stimulus money that successfully held off another Great Depression. It’s good. As a result, however, there is simply a lot more money in America than there used to be. That money has gone into every type of asset – stocks, real estate, whatever. Its enormity drives strange bubbles, the kind of bubbles that appear when people are desperate for salvation. Booming “meme stocks ”like GameStop rose and fell, with their up and down stock charts a clear example of the impossibility of pump-and-dump systems to replace a functioning social safety net. Even more significant is the rise of cryptocurrency (and, to a lesser extent, NFTs, the ephemeral online works of art whose value is now approaching that of the entire traditional US art market). Crypto is now worth trillions of dollars. All of this value is not based on a fundamental utility, but on the idea that there will always be someone to come along and pay you more than you spent on your crypto. This is going to end badly.
They are called crypto “Currencies ”, but they are clearly not currencies. Their value fluctuates far too much to be a useful medium of exchange. So what are they? They are collector’s items, pure speculative objects with no intrinsic value. When you buy a stock, you own part of a company; When you buy a home, even if the price goes down, you still have a home. When you buy a bitcoin, all you have is the title of a computer code that can do absolutely nothing for you other than get someone else to pay you money for it. In the midst of a mania we are in now, the price of these imaginary assets tends to go up because collective public opinion is that prices will go up. If that sentiment changes – be it out of fear or some event that causes crypto holders to cash out – the price will go down. This fundamental dynamic has been demonstrated millions of times in financial history, often through assets with far more substance than crypto.
Like meme stocks, crypto is a poor substitute for the American dream. A functioning nation would end gerrymandering, pass campaign finance reform, end the filibuster, abolish the undemocratic U.S. Senate, tax great fortunes, introduce public health care and build a social safety net to make sure no one in our very wealthy country does all the way through life’s financial cracks slipped and was ruined. But that’s not the American way. The American way is to cheer on the lucky few ultra-rich and celebrate them as heroes and find a way to emulate them, even though such a thing is mathematically impossible. Instead of socialism, we gave people crypto. They’re buying crypto, for the most part, not because of a high belief in techno-futurism, but because they think it’s a way to get rich quick, at a low entry-level price. Crypto is just a modern lottery ticket. But while lottery tickets cost you little, crypto will inflate to the moon and then crash down the drain in far more devastating ways. Perhaps the bitterest irony is that while normal people flock to crypto thinking that it is a utopian land of opportunity for the little guy to make money, it is in fact largely controlled by a small cartel of wealthy investors. Just like everything else.
The crypto crash is going to happen for the same reason that all Ponzi schemes break down at some point: there aren’t infinitely many new people willing to pay ever-increasing prices for the stuff you currently own. The more interesting question is not whether many retail investors lose a lot of money on their crypto investments, but what happens when they do?
Here’s what will happen as hundreds of thousands of younger investors are battered by the crypto crash: They will be radicalized. This is not simply seen as a drop in prices, because crypto is much more than a simple investment to its most ardent followers – it represents a way out of the American trap. It represents the existence of opportunities, the possibility of economic mobility, the confirmation of the idea, that as a normal, hard-working person with no connections, you can go from the bottom up, just thanks to your own smart choices. If this myth is shattered, disillusionment with the American system will ensue. Unfortunately, given the current realities, these newly disaffected and radicalized, angry and broke people will turn to fascism rather than socialism.
Crypto, a portfolio of online tokens that are basically worthless, is already almost exclusively based on myths. Its value proposition is so opaque that almost any narrative could be crafted to plausibly explain if it melts. It was the Fed! The government! The Left Who Hate Entrepreneurship! It was the dark and devious forces of the shadowy deep state! Everything will do. It will enforce the priorities of those who have put their trust in cryptocurrencies as a good substitute for the American dream – a bevy of Barstool Sports readers and tech libertarians, and the kind of people who used to buy silver bars from Alex Jones before they hooked up Bitcoin turned. The crypto evangelist population leans heavily towards some sort of new age libertarian right against the government, and when they see their financial dreams fizzle out, they are likely to seek revenge on what they already despise. The widespread impact will result in large numbers of new angry, bitter, disaffected and hopeless people too steeped in the culture wars to turn to working class solidarity and turn to hatred instead.
So if you want to have fun during this end time, think about how much the timing of the crypto crash could affect the very very existence of American democracy itself. For example, if the crash occurred six months before the 2024 Presidential elections could be fuel enough to drive Donald Trump or one of his followers back to the White House and further poison national dialogue with anger and vengeance. Fun thing to speculate on.
Of course, the details of these changes cannot be foreseen. But I can safely say that in hindsight history will see crypto as a gigantic bubble that – as capitalism always does – wiped out the finances of tons of little people who couldn’t afford to be wiped out, and the rich mostly intact just because it could convince ordinary people that this time was different. The delusion that salvation from capitalism can be found in a new, smarter capitalism is incredibly seductive and always wrong. Let’s hope we can make it before it’s too late.