Crypto-anarchism and Silicon Valley’s Obsession with Cryptocurrency

Author: Abby Copeland, Graphics: Carol Lu

The BRB Bottomline

Cryptocurrency is more popular than ever. Whether the Evergrande fiasco is popping up in your news feed or Ethereum is a part of your portfolio, it seems like everyone is obsessed with cryptocurrency. In the following article, investing columnist Abby Copeland attempts to discover the true sources fueling the crypto-craze and why the ideology backing it is problematic.


Silicon Valley’s Search for the Latest Gold Rush

In the post-mortem phase of the 1990s dot-com era, individuals in Silicon Valley are searching for the latest get-rich-quick scheme. Many investors are moving away from institutional markets and are adding popular cryptocurrencies such as Bitcoin and Ethereum to their portfolio. Both young and old traders have found themselves caught in the trap of the “crypto-craze.”

Crypto-anarchism

What is Crypto-anarchism?

In order to understand the appeal of cryptocurrency, one must first understand Crypto-anarchism. Crypto-anarchism, a political ideology closely tied to Libertarianism, is the belief that advanced cryptographic software should be used to protect individuals’ financial, political, and economic interests from the government. A prime example would include when an individual makes transactions using Bitcoin so the government cannot monitor their digital footprint.

The Economic, Political, and Psychological Appeal of Crypto-anarchism

Advancements in cryptographic technology, coupled with immense economic ambition in Silicon Valley, have contributed to the modern-day crypto-craze. Many members of the Silicon Valley community claim that the government has no place in heavily regulating financial interests. However, these individuals use Crypto-anarchism as a smoke-screen. Ironically, it seems Silicon Valley will only support government regulation as it benefits them. In the case of cryptocurrency, many will claim they are anti-government to advance their economic interests.

Furthermore, the current political climate serves as a catalyst for Crypto-anarchism. With a recent presidential transition and a country more polarized than ever, left-leaning Silicon Valley individuals are utilizing cryptocurrency trading as a method to rebel against traditional governmental systems. In addition, many members of this alleged anti-government camp believe that by buying cryptocurrency, they are taking part in a “fintech revolution.” From a psychological perspective, participation in this fintech revolution results in investors believing that they are evoking change and making history

The Problem

Despite the current political and ideological forces that are driving the crypto-craze, investing in cryptocurrency, in my opinion, is a dangerous and reckless move.Firstly, most cryptocurrencies have no intrinsic value. It is therefore challenging to evaluate cryptocurrency accurately. Moreover, the very anarchist and decentralized nature of cryptocurrency that Silicon Valley champions has no place in America’s heavily regulated financial sphere. Trading cryptocurrency under Crypto-anarchism also violates the fundamental rules of trading psychology. Trading psychology emphasizes investing as objectively as possible and never letting your emotions influence your decision to buy or sell. However, crypto-anarchists are letting the emotional appeal of cryptocurrency influence sway them. Cryptocurrency is undoubtedly trendy, but time and time again the market has demonstrated that just because an asset is popular or innovative does not mean that it is a safe and reliable investment. Given the concerns of government regulation and the lack of intrinsic value, cryptocurrency is ultimately an extremely high-risk asset. 

What’s Next

Despite the apparent risks, many traders will continue to invest in cryptocurrency for the foreseeable future. Even if crypto-anarchists make stock-market gains, their positive returns are likely driven by speculation, big-tech market manipulation, and an overvalued bull market. Meanwhile, the downside for cryptocurrency is extremely high. Due to the volatile nature of cryptocurrency, many investors will encounter sizable losses. But without intrinsic value or a path to regulation, this trend will mostly be contained to crypto-anarchists in the Silicon Valley bubble, while conservative investors remain more skeptical.

Take-Home Points

  • Silicon Valley is searching for the latest gold rush and buying cryptocurrency in greater amounts than ever before.
  • The appeal of cryptocurrency can be explained by Crypto-anarchy, the belief that advanced cryptographic software should be used to protect individuals’ financial, political, and economic interests from the government.
  • Although many in Silicon Valley claim that the government has no place in heavily regulating financial interests, they support government regulation when it benefits them. In the case of cryptocurrency,  many will claim they are crypto-anarchists to support their own economic interests.
  • The current political climate has also served as a catalyst for Crypto-anarchism. Left-leaning investors are using Crypto-anarchism as a method to rebel against traditional governmental systems.
  • Ultimately lack of governmental regulation and intrinsic value makes cryptocurrency an extremely high-risk asset.

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