The story runs loosely like this. A long time ago, I was asked to write a newspaper article about Bitcoin, and I thought, well, I should buy one, just to see practically how difficult the process is.

I identified a Bitcoin platform which was backed by an Argentinian enthusiast who had started a Swiss-based sales operation and gave a very convincing podcast about Bitcoin. His main argument was that Bitcoin was proving very useful to Argentinian citizens trying to protect themselves from the vagaries of the Argentinian currency movements and the even vaguer vagaries of the Argentine government’s economic policy. You don’t have to be a scholar of international politics or currency movements to see how this may be attractive to South Africans.

This was the early days of Bitcoin, just at the point where people were starting to notice. The platform required you to make a deposit via a bank in Slovenia. I mean no disrespect to Slovenia, but this made me slightly nervous. Where is Slovenia exactly? And what is its relationship with Slovakia?

Still, after getting foreign exchange approval, which was not difficult since the investment amount was tiny, I made the deposit. At that stage, a Bitcoin cost around R10,000. Amazingly, the money showed up in my account, and what’s more, the platform sent me a Visa-based debit card linked to my singular Bitcoin.

I made a great show of buying things with it in front of my colleagues, who by now considered me an expert on the topic of cryptocurrencies because I actually had one. That’s all the qualifications you need, apparently.

Much to my surprise, the Bitcoin exploded in value, and I promptly cashed in half of it to go fishing in Canada with some friends. That, I hoped, was exactly the kind of whimsical thing to do with a crazy gain on an unusual investment, made more whimsical by the fact that I caught no fish.

On my return from the fishing experience, I felt so bad that I had gone on a trip without my wife, I gave her the other half of the Bitcoin. Of course, Bitcoin immediately exploded in value again, and I was forced to argue that actually there was an implicit sub-clause to the Bitcoin gift contract, which sadly placed a ceiling on its value.

Fortunately, our marital relations were saved after Bitcoin then collapsed in value, although we still argue about who said we should sell at what point in time. As it happens we are HODLing our “investment”; Yes, that’s right, hodling, not holding – as in Holding On for Dear Life.

The reason I’m telling this story is because if you have made money on crypto, it’s very difficult not to get swept up in the thrill of it. 

There is an odd hyper-personalised aspect to it all; you are so proud of your lucky investment decisions that you are tempted to believe they are somehow implicit evidence of your personal brilliance. It’s as though you are individually responsible for the success of the assets, as opposed to all the people who, say, actually work for a company and make it a success.

In crypto’s case, there is an additional strand we should all be suspicious of: the narrative. It’s one of our weaknesses as humans that we tend to believe in things which have a story behind them. And as stories go, crypto’s is just fabulous.

Crypto’s story is based on three very convincing and worthwhile arguments. Crypto operates largely outside the fiat money system. In other words, it operates outside the realm of state-based money creation systems. This may not seem to be a huge advantage to people who live in first-world countries with stable currencies, but if you are Zimbabwean or Venezuelan, then there are times when being divorced from the state system might be very useful. But even for first worlders, the potential protection against inflation implicit in crypto is something to think about.

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Second, you have to think a bit about what money does in an economy. Money is magical to the extent that it helps goods circulate, and massively speeds the process. Crypto has at least the potential to increase the speed of that circulation even more because of its international, digital character.

And third, the distributed ledger aspect of crypto takes the management of this circulation out of the hands of a singular institution, which can be mismanaged, and places it in the hands of the users, who are unlikely to mismanage their own asset. The distributed ledger makes the exchanges transparent and protects users against the failure of any one institution or government.

These are all great arguments. But we are a little down the line now: how are they stacking up? The truth is, not so well. If the argument is that crypto will protect you against inflation, then the past year has disproved that emphatically. As inflation has jumped around the world, crypto has slid. Crypto seems, at least now, much more correlated with the tech market than with, say, gold. That might change, but today it is a mark against crypto.

The second argument on the utility of crypto is taking a while to manifest. It’s not that the argument is invalid. I think it’s a bit like the issue of why cellphone banking hasn’t taken off in SA, but has in Kenya.

In truth, most SA citizens are pretty well served by the local banking system. But when cellphone banking started in East Africa, it was actually quite hard to open an ordinary bank account and transact.

Crypto could substitute for cash, but cash or cash equivalents like credit and debit cards get most people most of the way there.

As for the third argument, to me, this has always been a bit specious because although the transactions are transparent on the ledger, the users themselves are not. There are ways to discover who the actual users are, but since crypto is so popular with the underworld, its claim to enhanced transparency falls a bit short.

Crypto analyst Steven Boykey Sidley lampoons crypto sceptics in this piece on Daily Maverick, and points out that there have been exactly 461 crypto obituaries in major news outlets over the past 12 years. We know the figure because there is actually a site that tracks every triumphant “crypto is dead” article. Take a look, his series on crypto is great.

I certainly wouldn’t put myself in that camp — I would love to see crypto succeed. My wife certainly would. But I worry now not that it will “fail”, but that it’s not going anywhere fast enough to maintain the momentum. If the only utility of crypto is that it has the possibility to increase in value, I just think that’s not enough. That’s a bit like investing in a zero-coupon perpetual.

I could be wrong; this is the season to be critical of crypto since the value is so depressed at the moment. But I do think crypto needs to demonstrate its utility as a form of payments fairly quickly. The danger is not that it’s “dead”, but that it just gets to be kinda boring.

Meanwhile, markets are holding: the All-Share is above 70,000 again. It’s just amazing what kind of abuse this market can handle and still keep on going. DM/BM