Gongol.com Archives: February 2022

February 20, 2022

Cryptocurrency markets turn to Super Bowl ads

People watching the Super Bowl might have been surprised to witness advertising for cryptocurrency markets. After all, we don't usually encounter a lot of advertising for forex markets in mass media, and if we did, the viewer might reasonably wonder whether the ordinary retail investor were sophisticated enough to understand the nature and risks of betting on the relative values of currencies. ■ Such betting is exactly what parts of the cryptocurrency community are trying to promote with mass-market outreach like the Super Bowl advertising blitz. Super Bowl advertising is rarely about education; it's about emotion -- smashing Big Brother, lusting after Cindy Crawford, kneeling before the site of the Twin Towers. And in 2022, the emotion being pushed was the fear of missing out, with the words: "Don't be like Larry. Don't miss out on the next big thing". ■ It is a shame that cryptocurrencies, at least for the time being, are a market driven almost purely by speculation. It's sad because there is a viable argument for the utility of digital currencies not subject to government control -- for instance, as a store of value for those looking to escape life under oppressive regimes. If someone were living in a country like China and looking to leave with more than just the clothes on their back, cryptocurrencies might be a liberating tool. ■ But liberation from oppression isn't what the ad featuring a computer-manipulated young LeBron James. In selling was selling as it dripped with FOMO -- the Fear Of Missing Out. "Is the hype too much?" asks "young" James. "If you want to make history, you got to call your own shots", responds his modern-day counterpart -- projecting from a vantage of wisdom and experience. "Fortune favors the brave" screams the title across the closing shot. ■ At various times in history, "fortune" has favored "brave" speculators in tulip bulbs, Manhattan real estate, and .com startups. That doesn't mean any of those bubbles were necessary, virtuous, or prudent. "Fortune" also punished lots of "brave" speculators in those same manias. ■ Charlie Munger has argued that because of the curse of speculation and the perverse incentives sometimes in effect within our regulatory framework, "[I]t's very hard to get the government to make good, wise decisions about something like Bitcoin." While Munger may be too pessimistic about the potential utility of cryptocurrencies (and too magnanimous in his assessment of China's government for having cracked down on them altogether), his fundamental assessment is correct: The enthusiasm on display by promoters tends to obscure the real harm being done by encouraging regular people to enter the cryptocurrency casino. ■ For that is all it is right now: A casino in which turbulent pricing prevails, promises of riches cloud judgment, billions are laundered, and scammers have a heyday. ■ Emotions affect all sorts of ways in which people allocate their money -- whether shopping, investing, or speculating. That's nothing new. Nor is the allure of quick riches -- gambling will always be with us. But gambling cloaked as being on the "smart" side of investing ought to be discouraged. Anything can be sold as currency if people are willing to believe it is scarce and represents a store of value: Gold, seashells, or publicly-tracked computer bits. But we really don't need more speculation in our lives: The fear of missing out ought to be eclipsed by the skepticism of being taken for a ride.