posted: January 27, 2024
tl;dr: A series of vignettes to remind us of the excesses and inanities of the cryptocurrency boom of 2020-2022...
Having founded an Internet equipment company, Oresis Communications, in the late 1990’s, I was an active participant in the dotcom bubble of the late 1990s and early 2000s. Before the bubble burst it was relatively easy to raise money from venture capitalists, but the company couldn’t manufacture its own form of currency. That would come later, in the Initial Coin Offering (ICO) craze of the cryptocurrency bubble. During that time frame, I was the old tech industry veteran who lectured the younger hot shots that “when I was your age, we had to do an IPO (Initial Public Offering of a registered security) instead of just issuing an ICO!”
Having seen the excesses of the dotcom bubble, I used to think I’d never see anything like it again. I was wrong: the excesses of the cryptocurrency bubble were even more extreme. I now expect a similar bubble every twenty years or so, after the lessons of the last have faded from most people’s memories. The 2040s should be another great time for scam artists.
I didn’t get caught up at all in the cryptocurrency bubble. I briefly considered joining a crypto firm in 2015 when I was searching for a new job, but the industry seemed sketchy to me. I joined an education software startup company instead. I remember seeing a neon Bitcoin sign in another company’s space at the 1871 business incubator where I worked at that startup. But if I had bought Bitcoin then and held it through its ups and downs since, I’d have made some good money, on paper. I’m still not a believer in Bitcoin.
The author of Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall, Zeke Faux, takes a similarly skeptical view of the crypto industry. Faux properly, in my mind, continually asks a critical question: what are the real-world uses of a given cryptocurrency? Or a Non-Fungible Token (NFT) of a monkey image? Faux is a Bloomberg reporter by trade, and the many people he asks this question struggle to provide a coherent answer. Clearly crypto is a way for people to move value around the world with less oversight from governmental authorities than transferring national currencies through the regulated banking system. I’m not saying that there are no other use cases for crypto, but I am saying that until those use cases are popular, or the cryptocurrency is backed by something of value outside the crypto world, the value of a given crypto is purely speculative.
Number Go Up is an entertaining, easy to read romp through the major stories of the COVID-19 pandemic-era cryptocurrency boom and subsequent bust, roughly 2020 through 2022. Zeke Faux pursued a variety of different stories during those years, which he strings together in Number Go Up at a pace of one per chapter. More than a few of the topics Faux writes about deserve books of their own, in order to explore them in-depth. That’s the downside of Number Go Up: Faux is unable to solve many of the mysteries he pursues, such as the financial reserves that supposedly back the Tether cryptocurrency. Readers have to settle for overviews coupled with some tantalizing tidbits. On the plus side, Faux is able to cover many of the major crypto stories of those years, so the book serves as a decent retrospective of the era.
The two most interesting stories that Faux investigates are Tether’s backing and the use of Tether in human trafficking and “pig butchering” scams. It seems that the Tether stablecoin almost certainly wasn’t 100% reserved in the past, but there never was enough of a run on Tether to make that deficiency obvious. Now with interest rates in the 4-5% range, the company behind Tether can hold U.S. Treasuries and pocket all the interest, growing the reserves and returning profits to shareholders. Tether likely escaped its brush with death.
Faux follows the trail of a pig butchering scam all the way to Cambodia, where poor people are being trafficked by violent criminals who force them to live and work in slave-like conditions. Due to its wide acceptance, ease of exchanging into U.S. dollars, and its relative anonymity, Tether is the preferred payment method. Cryptocurrency advocates who believe that Bitcoin, or any other cryptocurrency, will bring about world peace and harmony should read Faux’s reporting on human trafficking in Number Go Up.
There’s a lot of blame to go around for the cryptocurrency bubble. I addressed this topic in The failure of the elites: cryptocurrencies and FTX. I think Faux would agree with a lot of what I wrote, as I agree with many of the views he presents in Number Go Up. Neither one of us got rich from crypto, but nor did we sacrifice our morals or our freedom. Unlike Sam Bankman-Fried.