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Wednesday, November 30, 2022

Bitcoin: a new philosophy or a temporary channel for disenchantment?

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Considering current prices, the millions of individuals who invested in this asset (as well as those who did it in the main stock markets of the world in that same period) are losing money today.

Likewise, the study maintains that the purchase of bitcoin by these small investors allowed large investors (called “whales” in the crypto jargon for having a very significant amount of cryptocurrencies) to be able to dismantle positions benefiting from the entry of these retail flows.

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On the other hand, the report indicates that the majority – more than 40% – of retail investors in bitcoin are men under 35 years of age, more prone to risk than older adults and women.

Beyond these facts -which give a lot of cloth to cut-, the study in its most provocative conclusion also affirms that the massive entry of retail investors in developed countries is due more to speculative reasons -due to the sudden and significant rise in prices- than to mistrust in the traditional system.

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This latest finding contradicts the creators and believers who propagate bitcoin, who define it as “a decentralized network of trust”, and maintain that the sustained adoption of this crypto has as a central explanation the lack -precisely- of the population’s trust in the traditional regulated financial system and unsupported expansionary monetary policies carried out by central banks.

The Lehman Brothers crisis of 2008 is a close example in which these visions are justifiably watered down, when the States came out to support the traditional centralized financial systems -and poorly regulated- at a monumental fiscal cost, while hundreds of thousands of companies went bankrupt. and millions of people were left without work. That same year bitcoin was created.

It is difficult to gauge the weighting of each of the different causes that explain the success of bitcoin, which since its birth -just 14 years ago- has managed to be on the lips of a large part of the world population and have millions and millions of followers.

Among the set of reasons that supports its growth, the following can be listed: the attractive decentralized and anonymous design of the product, the spectacular technological advance that made its creation and dissemination possible, the greater use of digital tools due to the pandemic, low interest rates, the appearance of centralized crypto entities (exchanges) that facilitated and amplified the operation, and the fabulous propaganda machine financed by the main players in the ecosystem.

However, in addition to these factors, it is difficult to explain the growth of these private digital assets without relating it to the growing delegitimization and loss of prestige that Western nation states have suffered in recent decades. The growth -especially in the younger age group- of these (supposedly) decentralized crypto ecosystems, which confront the traditional financial system would also seem to have some kind of symmetry or point of contact with the appearance of politicians who capture that disenchantment by questioning the system traditional politician, whether on the left (Boric, Petro, Castillo) or on the right (Trump, Bolsonaro).

In the financial area, the emergence and speed with which technological finance and the crypto system broke out in recent decades left States perplexed and immobile, unable to digest and react to the nature, complexity, and implications of these phenomena.

Technology is just a tool that can be used in various ways. Used well, it can strengthen the growth of the economy, democracy, equality and transparency in the functioning of our societies. It is time for States to think about themselves and reformulate their role and the tools they use to meet their objectives in line with this new reality and the demands of society, working cooperatively with both traditional actors and these new ones. players. It is a task for the whole of society to get States to embrace this technological revolution based on knowledge, on the development of new digital networks, on artificial intelligence and on the advancement of data science for the benefit of the entire population.

Professor of Cryptoactives and Digital Currencies. Postgraduate FCE, UBA.

Source: Ambito

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