The Bank of England has spoken. Why should we listen?
Crypto investors aren’t dumb.
Well, some might be. I mean, there’s a cross-section of all types of people investing in all different kids of things and “dumb people” are likely part of the current crypto craze too. However, you’re not dumb. I know this because you are reading this — if you are taking the time to seek out information then you’re an informed investor.
So, when conservative (small-c) investors condescendingly lecture you about risk as it relates to buying crypto it’s easy to roll your eyes.
You don’t need to have the “greater fool” theory explained to you; you realize that there is risk involved. If you don’t realize that there is risk involved as of yet…well, read that second paragraph again and reflect of your position in this world.
So, when Bank of England Governor Andrew Bailey said yesterday that investors should be “prepared to lose all their money,” it’s unclear as to who he was trying to talk to.
Or, why you should listen. I mean, he’s a 62-year old career bureaucrat that went to Queen’s College and likely hasn’t spent a day of his life worrying about whether he could put food on his table the next day because his assets disappeared in a poof of inflation.
When guys like Bailey speak about crypto they are mostly doing so for two reasons.
Firstly, they like to hear the sound of their own voice and believe that they have been put into their position of power based on a divine act of God and that, as such, they owe it to the little people to share their extreme wisdom to protect them from themselves. Basically, Bailey actually thinks your dumb.
He also doesn’t realize that a least part of his success is based on a combination of born privilege, nepotism and dumb luck. Additionally, Bailey, and other’s like him, are deeply rooted in the neo-liberal economic system that has defined the Western World for the better part of 50 years. They cannot comprehend things that challenge its norms since they have been insiders their whole life.
Crypto has never been about insiders.
The second reason they talk about crypto is because they keep getting asked about it by financial and political reporters looking for a quick and easy quote. That’s not really their fault. Although they could be more honest in their answers, or evolved in their thinking.
The core aspect of Bailey’s belief on crypto is that there is no “intrinsic value.” What he means by that is that you can’t whip out to Tesco and buy tomatoes with it. On that level, it’s fair enough. That is the next stage of crypto’s development and it is a challenging one. There does need to be a greater level of pragmatic uses for the currency soon, or there probably will be a correction.
A correction, not a collapse to oblivion. But, that’s the same with anything that anyone might invest in. Lots of assets have seen value driven by hype rather than fundamentals in the past. In some ways hype is a fundamental now.
So, should you be prepared to lose all your money when investing in crypto?
Sure. You should be prepared to lose all your money investing in Goldman Sachs too though.
That’s unlikely to happen, of course. Just like it’s highly unlikely that we are going to wake up tomorrow in a world where crypto’s value became worthless overnight.