A darkening view

My last post gave the corporate financial media a well deserved skewering. But it barely cracked the surface. Though just plain ignorance explains a lot of financial media content, marketing predominates. It’s no accident that the overwhelming bulk of coverage is devoted to Wall Street products. Even when others (like gold) have solidly outperformed. It’s one big sophisticated advertisement. Your local used car salesman is worthy of more trust.

Bitcoin is no exception. Despite the attempt to market it as an anti-establishment asset, disproportionate and fawning establishment media coverage says otherwise. In itself, it might have qualified as an anti-establishment asset, but the tin-foil-hatter in me has come to suspect its establishment sponsorship derives from an attempt to get people to part with their gold. Exhibit A: The sometimes subliminal but often overt marketing of bitcoin as “digital gold”.

Gold for the technologically hip.

If the actual intent had been for it to represent digital gold, it could have been backed by gold. But it wasn’t so it isn’t.

Just one of the disingenuous sales pitches is that bitcoin, in contrast to establishment fiat money, is limited in supply. Only twenty one million can ever exist. That may be true of bitcoin proper, but the potential number of knockoffs is infinite. There are already thousands of wannabes. They may not be bitcoin clones, but there is nothing standing in the way. Any clever network engineer can create clones with the same attributes. The only thing that such clones would lack is the marketing.

This makes clear where bitcoin gets its market value; marketing. So far in its short history that’s been supported by a stellar track record of price gains. But which track record itself in turn rests on marketing. The whole thing is a bit circular.

And what is marketing? It’s something somebody does to make them money. Not you.

Actual gold, on the other hand, has only about one hundred potential competitors, created billions of years ago. And only a select few have any practicality as money. Some are too plentiful, others radioactive… Oxygen, for instance, is obviously as vital to humans as an element can get, but literally surrounds us, and far as I know no one has even attempted to use it for money. And who would want to walk around with a pocketful of thorium? The few that have made any headway, – silver, copper, platinum – can also be owned as stores of value with no fear of anyone creating cheap knockoffs.

Scarcity is not the only element though. Another is the air of technological wizardry. Don’t understand blockchain code, hard forks, halvings, and a whole culture of techno-arcana that has been built up around it? Great! Then you must surely be impressed by the brilliance of the people who do. And it gives you a handy retort to critics; you just don’t get it. You old fogeys just aren’t savvy to a new generation of technology. You don’t get progress.

I beg to differ. We old fogeys have been there. We’ve lived through asset bubbles built on clicks and eyeballs. You can either learn from our experience or your own. If you believe bitcoin is digital gold, is it because you’re clued in, or because you haven’t yet been burned by glitzy techno-marketing?

None of this is to say that bitcoin has no place in the world or even in your portfolio; that’s for you to decide. It is to say that it’s not a form of gold or even a substitute for gold. That’s just marketing:

Gold for the technologically hip.

If the actual intent had been for it to represent digital gold, it could have been backed by gold. But it wasn’t so it isn’t.