A bit over a month ago on the launch of the Chicago Mercantile Exchange’s Bitcoin trade I predicted a déjà vu. Here was the subprime mortgage disaster, sprinkled with the dot com boom, mixed in a glass of fresh 21st Century hubris waiting to bubble over. So, the question I posed with overt sarcasm, was how many olives would it take to send this martini splashing over its side?
Then I realised this is complex stuff. Bitcoin, cryptocurrency and blockchain are awe-inspiring feats of human ingenuity. They rank right up there with tourist space travel and driverless cars.
Ask the smartest guys in these rooms and their demand is manic. “Bitcoin will hit $100,000 USD”, one expert said. Close your eyes and you can picture the millions of citizens sitting in their driverless Pontiacs, wind rustling their hair because being a passenger in life is everyone’s dream.
Look, the foresight needed here isn’t rocket science. The true red flag came last month when at least two companies changed their names to “(Insert your favourite noun here) Cryptocurrency Corporation” and their shares went through the roof. One of whom was Kodak.
Their website read: “KODAKCoin allows participating photographers to take part in a new economy for photography, receive payment for licensing their work immediately upon sale …”
Apparently, they haven’t been able to do this till now. It went on: “And sell their work confidently on a secure blockchain platform”.
This “blockchain”, would then crawl through the web looking for unauthorised use of photos so registered.
What is Blockchain?
Blockchain is the name for millions of private computers running faulty Intel and AMD chips networked together in a decentralised way and compensated for the privilege. It’s basically a data centre spread across masses of homes across the world whom you’ll never know and whose computer cleanliness and reliability you’ll never be able to confirm. “Blocks” of data and code are deposited along this “chain” of computers theoretically making the risk of hacking or manipulating the whole impossible. Just don’t call it a “computer network” because that’s boring.
That’s also when I first heard the term “ICO”—Initial Coin Offering. But it was the media then reporting it so matter-of-fact, that made it seem totally legit.
Backtrack to the year 2000 and I remember the day I bought futures in an Australian mining company I’d never heard of.
The decision was based on a tip from someone I can’t remember who heard it from someone else, who got it off someone they barely knew et al. Sound familiar? “Psst”, the stranger in the GAP sweat and chinos motions to you. “Buy Bitcoin you can’t lose!”
This mining company, you see, had apparently acquired the rights to some software. The press knew little more. Did this software have any clients? What was a mining company doing diversifying into tech in the first place? All we knew was this business had now become a quasi-dot com and was therefore a money printer.
And my return on investment multiplied a few weeks later. So I doubled down on the way to a new kitchen fit out. Two weeks more, my futures simply crashed. Over fifty cents per unit fell to nothing. I’d not even get a new wall tile.
Without knowing it, I’d become part of the world’s first dot com bust. Here’s the warning we were all given:
Well, it’s now 2018 and thank goodness we’ve learned a lot.
After that bust we instead started seeding social media start ups with venture capital no profits required—and we made billionaires out of their CEOs. Now we’re re-seeding dot coms. Nada.
After the Global Financial Crisis ten years ago, we gave our nod to consumer credit at 10%-20% despite wholesale rates nearly zero—and we made multi-millionaires out of their CEOs. Nada.
And forgetting the carnage caused by record mortgage defaults, we re-inflated the real estate market with mums, dads, Chinese students and oligarchic all-cash types—and we made tycoons out of realtors too. Nada.
The cryptocurrency crash has already begun. Bitcoin has fallen over 50% since my last words here. But when the true denouement comes the question will be, what else will go down with it?
Japan once the golden child of the 80s; overnight no more. WorldCom, Enron, Madoff, Bears, Lehman the giants of Capitalism; overnight no more. My little mining dot com; overnight no more.
Can’t sleep? Try counting the US national debt backwards or just start at 665 which is the loss the Dow Jones made on Friday. Yes Mr Berra, it is “déjà vu all over again”*.
© 2018 Adam Parker. You’ve just read a Parkerpinion.
Main picture: Tracks to the Global Financial Crisis, 2008. Author’s Photo.
* Said New York Yankees legendary catcher, Yogi Berra.