Photo by Maxim Hopman on Unsplash

One of the most common questions I’ve been getting this week is from young investors (they wouldn’t call themselves investors, but they are) wondering why their crypto holdings are going down as fast or faster than the stock market.

“But I bought all this Ethereum because I knew the market was about to crash,” one Coinbase trader complained to me.

“Biden was printing money by giving all those stimulus checks and unemployment benefits,” another explained, sharing his rationale for accumulating bitcoin and NFTs. “I knew there was too much in circulation, and I was right. But bitcoin was supposed to be a hedge against inflation.”

Sorry, but bitcoin wasn’t supposed to be a hedge against inflation. Nor was it intended to be a non-correlated investment strategy — something that moves in the opposite direction of the stock market.

Bitcoin, and the other “original” blockchains were meant as a way for people to transact more efficiently, independently, and freely than they could with expensive, bank-issued, interest-bearing currencies. An invention that emerged in tandem with Occupy Wall Street, the blockchain was less an investment vehicle than a way of detaching our transactions from financial speculators altogether. The opposite of an investment vehicle. It was people making markets out of money that were screwing up the economy for the rest of us. The blockchain was supposed to decentralize the authentication of transactions so that we could all exchange value with each other without the extractive interference of banks.

While the wider adoption and functionality of bitcoin and other tokens required some “buy in” from investors who believed in their value and sustainability, the mad rush into crypto and NFTs by speculators was something else entirely. While a few people — like some of my friends — may have thought of bitcoin as a new “store of value” like gold, the hockey-stick rise of crypto assets attracted a whole different population of get-rich-quick investors. Everyone from the kids on Reddit and Elon Musk to Andreessen Horowitz and the UAE sovereign wealth funds got in the game.

Crypto’s astonishing, if short-lived success as a speculative investment has only undermined its entirely more revolutionary function as a currency alternative.

The more people that invested in crypto for the spikes in value, the more dependent these tokens were on “risk on” attitudes. This meant that instead of serving as a ballast against market volatility and financialization — the way boring assets like gold and silver usually do — these coins became absolutely tied to broader market fluctuations. When the stock market went up, people felt like taking more risks, and crypto went up. Now that the stock market is going down, people are selling crypto either to cover their losses or simply because they have grown more risk-averse.

Crypto’s astonishing, if short-lived success as a speculative investment has only undermined its entirely more revolutionary function as a currency alternative. Built to replace greed and obfuscation with access and transparency, the blockchain succumbed to the very financial avarice it was intended to counteract.

Now that investors have lost faith in the blockchain as safe “bet,” those of us interested in its true utility value may just have more of a chance to steer how this technology is used. Unless you’re looking to make money with money, a stable bitcoin will serve you better than an expensive one.

Douglas Rushkoff’s upcoming book, Survival of the Richest: Escape Fantasies of the Tech Billionaires, is available for pre-order. Rushkoff is a weekly columnist on Medium, and the author of books including Team Human, Throwing Rocks at the Google Bus, Present Shock, and Program or Be Programmed. Rushkoff is host of the Team Human podcast, a graphic novelist, and a professor of media theory and digital economics.

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