Is One Reason Why the Status Quo Disdains Bitcoin Is the “Wrong People Are Getting Rich”?

The psychology of money, wealth and speculative manias is endlessly fascinating. Most of what’s written on these subjects focus on the process of building wealth as if it were a quasi-science rather than a psychologically driven process. Only speculative manias attract a psychology-based analysis, usually characterized as some variant of the madness of the herd running off the cliff en masse.

But money and wealth are nothing but more sedate reflections of the same dynamics that drive speculative manias. Much has been written about cognitive biases and thinking fast and slow, but these explorations do not exhaust the psychology underpinning money, wealth and speculative manias.

Few things have unleashed the Monster Id of wealth and money quite like bitcoin and the cryptocurrencies. Compare the speculative manias of the dot-com era (1995 – 2000) and the housing bubble (2002 – 2007) with the crypto-mania: in the first two manias, the status quo embraced the mania as rational and justified: the Internet would continue growing for decades, housing never goes down, etc.

But the status quo has not embraced cryptocurrencies with the same ardor–why? Instead of endless justifications for valuations, the status quo is filled with reports that 97% of all economists view bitcoin as a bubble, and endless articles decrying the bitcoin bubble as a fools game that will deservedly burst, and soon.

Why did the status quo embrace irrationally exuberant bubbles in the 1990s and 2000s, but views the exuberance of cryptocurrencies with disdain? I think this is a fruitful topic to explore, largely because nobody seems to be asking this question.

Here are my suppositions:

1. The status quo reviles cryptocurrencies because the wrong people are getting rich.

2. The status quo reviles cryptocurrencies because the usual insiders (Wall Street and its politico leeches) didn’t get on board early, and they’re deeply offended that they missed the boat.

3. Until the advent of bitcoin futures trading, the usual insiders had no means to skim profits from the exuberance.

To me, these dynamics go a long way in explaining the 97% of the status quo’s visible loathing of bitcoin and the cryptocurrencies.

In other words: why embrace some manias but not all manias? Answer: some manias make the usual insiders filthy rich, others don’t. The dot-com mania generated billions of dollars in profits for Wall Street and the rest of the financier-politico leeches (i.e. the rentier class) via IPOs (initial public offerings), insider deals and vast fees generated by trading the mania with other peoples’ money.

The housing bubble generated billions of dollars in profits for Wall Street via the issuance of mortgage-backed securities (MBS), CDOs and other exotic financial instruments based on mortgages and related securities, and realtors (and the rest of the housing industry) banked billions in commissions, fees and other skims.

In both cases, Average Joe and Jane reckoned the manias were their ticket to untold wealth. A relative few Average Joes and Janes did strike it rich, usually by being early employees of companies that went public, and a few others managed the impossible, i.e. buying low and selling high and then exiting the casino with their winnings.

But the vast majority of the Average Joes and Janes were fodder for the chipping machines of Wall Street and the FIRE (finance, insurance, real estate) insiders and elites. Far more people lost money in the period between 1997 and 2003 than won big and kept their winnings. Millions of people gambled on the housing bubble expanding forever and lost everything.

Now compare that to the cryptocurrency mania: Wall Street and the rest of the financier-politico leeches (the rentier class) have virtually no insider skims in the cryptocurrencies–is it any wonder they hate bitcoin with a passion that correlates to their inability to rake in billions of low-risk fees from the mania?

The psychology of FOMO (fear of missing out) is well known; the indignation of those who didn’t get on board before the ship sailed is less well noted. The financier/rentier class has a very high opinion of its own moxie and intelligence, and the fact that they missed the boat entirely on bitcoin et al. is like a knife of wounded pride plunged directly into their greedy hearts.

Those who can see past their own wounded pride are busy investing in blockchain applications and cryptocurrency funds, while those who cannot let go of their wounded pride are raging daily against the bitcoin bubble, and praying nightly to their evil gods for its collapse, to prove themselves right after all.

Every day that bitcoin doesn’t crash to zero is a day of pain for those whose pride was wounded by missing the cryptocurrency boat.

Even worse–if that’s possible for those whose greed is insatiable–the wrong people have gotten rich–techies, nerds, outsiders, rebels, etc.

It’s as if the crypto-rabble rebels just blew up the Financial Empire’s Death Star and got away with it.

Interestingly, few balk when privileged insiders mint fortunes for doing essentially nothing but exploiting their privileges. The corporate media heaps fatuous praise on insiders who reap billions of dollars from others’ labor and ideas via IPOs, leveraged buyouts, etc. because of course these rentiers are our bosses and overlords.

It’s dangerous for a mere peasant in the Corporate-State Feudal System (i.e. the status quo) to speak truth to power against the Financial Aristocracy that issues the paychecks.

You can bet that if a Wall Street insider had bought bitcoin in size for $100 each, said insider would be justifying today’s valuations and arguing for higher valuations ahead, just as he/she did in the dot-com and housing manias.

So it all boils down to this: the wrong people–rebels, outsiders, nerds and techies– got on the cryptocurrency boat while their insider/rentier “betters” blew it and are now raging bitterly onshore, not just resentful but indignant that this mania didn’t enrich insiders like it should have.

So sorry about your Death Star. I guess this doesn’t bode well for your bonus and promotion in the Imperial hierarchy. 

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  • cstahnke

    I agree but if history is any guide the oligarchs could sabotage the crypto-currency trendsince they have possibly the entire covert-operations community at their disposal.

  • jadan

    Bitcoin & cryptocurrencies are extra-constitutional. They are not officially legal tender. They are new money. Article I, section 8 is the basis for our national currency. Some may argue that the FRN is not constitutional either. Bitcoin is not. The “status quo” likes legality. Bitcoin has to become legal tender through an act of Congress. Until then, fools rush in. Bitcoin is a response to the failure of our national monetary system. It was seized by the 1% in 1913. If we had democratic money……and if wishes were horses… golly we’d all have a happy ride!

  • Shiggity

    It’s hard to make millennials into debt slaves when things like bitcoin exist.

    The young of the US / UK have basically been enslaved by centralized currencies. Here’s a clue, we’re tired of it.

    • Sparticus

      You know, if that were true, then there would be organizations of people gathering together to charge up their cards “MAX” and swearing oaths together to never pay. Given enough participants this would crash the banking system and fire a DIRE warning SHOT across the Bow of the US government.

  • ICFubar

    As my techie friend who develops cloud systems for big moneyed clients told me in passing, “Anything connected to the internet can be hacked eventually as anything in real life can be corrupted.” Bitcoin is speculative as well as being partially outside the current monetary system but big money can still play the pump and dump but would first have to bring the ship that sailed back into dock with strategic plays. Ya pays your money and takes your chances but in a world where supply and demand mean nothing with unlimited currency supplies and complicated algorithms to conduct the whole of the economy it’s probably better to ride the coattails of big money and not get greedy if willing to play the investing game.

  • Sparticus

    Bitcoin is not salvation, In all likely-hood bitcoin is a shadow ops CIA funded item. Nevertheless, you cannot get rich in the markets, unless you have money to begin with. Penny buyers and odd lot commoners never get anything except hosed by their broker. The common people are not buyers of bitcoin because the common people are poor. Bitcoin is being bought by government, institutions by proxy and most likely involve some sort of CIA plan to lure terrorists into the unsecure currency exchange over the internet.

  • unheilig

    The basic problem with bitcoin is that it’s still fiat money, unconnected to anything in the real goods-in-the-hand world, hence inherently unstable. Neither is it peer-to-peer as it’s supposed to be. If it was irrevocably tied to something real it could gain stability–for example if one bitcoin was worth the amount/cost of the electricity required by the server farms to generate it.

  • Sparticus

    There is an old saying: ” Anything that goes straight up comes straight down.” Bitcoins chart is unsustainable. You could trade it with tight stops, but buying and holding “suckers” will lose big.