Mar 5, 2018
A “magic” word has been haunting the headlines lately: “crypto-currency.” Why magic? Because these mysterious crypto-coins seem to have a property that our dollars and cents do not have: the simple fact of owning some is enough to generate huge amounts of money, without having to do anything for that, except to wait and be patient. Or so we are told.
In fact, the value of the “Bitcoin” has increased 15-fold over the past year alone. Of course, compared to the miserly annual wage increases that workers get, this is “magic.” What makes it seem even more magical is that these crypto-coins cannot be seen nor touched, let alone stashed away under a mattress. They exist only in an electronic form, stored on the hard disks of anonymous computers. And yet, they can be bought and sold – on the internet, of course – for good old dollars or pounds or euros.
The trick is to buy Bitcoins when their price is low and to wait until their price is high enough, before selling them. Where do the extra dollars come from? How is it possible to get richer without doing anything when, for millions, it takes an hour’s work to earn $8.25?
This is where the “magic” comes in, or rather, the “magic” of capitalism. Indeed, this is, in a nutshell, what the lives of the capitalist fat cats amount to: they get richer and richer doing nothing, or, in any case, doing nothing useful. Whether they’re company owners, shareholders or financial speculators, all they have to do is to wait until they can sell what they own at a higher price than what they paid for it. In a word, that’s the stock market. They get richer on speculation. But whichever way they get their profit, the fat cats ultimately get it from the value produced by workers’ labor.
Capitalism is exploitation plus speculation. The “magic” of crypto-coins is just that. The dollars used to buy Bitcoins come from the value produced by the working class – the Bitcoin being just an intermediate form these dollars take for a while. What drives the price of the Bitcoin through the roof is the fact that there are colossal sums that could be invested in production, but are not. The capitalists would never miss this “magic” opportunity to make such a fat profit out of their pile of unused cash.
However, while Bitcoin is the star, it is only one of today’s 1,432 different kinds of crypto-currency. Among these, 339 are worth nothing, not even a cent. Only one has a market value of more than 100 billion dollars, the Bitcoin. In fact, for every type of crypto-coin that takes off, dozens fail, causing massive losses. Moreover, the values of crypto-coins change a lot and very fast: even Bitcoin has repeatedly lost 20% or more of its value in a single day.
These huge variations are precisely what attracts rich speculators, because this means they can make even bigger profits provided they move in and out at the right time. But, by the same token, the larger the sums of money used to buy Bitcoins, or obtained by selling Bitcoins, the wilder are the ups and downs of its value. So the vicious circle which feeds the speculative bubble goes on.
There have been many speculative bubbles in the past, from the speculation on Dutch tulip bulbs in the 17th century to the speculation on high-tech shares in the 1990s. And the “dot-com” bubble paved the way for the real estate speculation that caused the 2007 banking crisis. Yet, all these speculative crazes were at least based ultimately on real assets. Whereas this growing crypto-coin bubble is just speculation based on thin air.
When will crypto-coin speculators finally decide that their gambling has become too risky? And what damage will they cause by withdrawing their funds? No one can be sure. But the bubble will burst.
In the meantime, what this crazy fad shows us, once again, is the mad irrationality of a system that is based on profiteering, i.e., speculation, a system that humanity simply cannot afford.