The New York Times Still Doesn’t Get Bitcoin

Up-to-date info isn’t available, but it’s now known that investors have poured at least $1.9 billion into the new crypto-tracking exchange-traded funds in their first three days of trading. The most bullish estimates expect up to $100 billion flowing into bitcoin funds by the end of the year.

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That’s a lot of pent-up demand, beating the last record inflows of $1.2 billion within three days in 2021 … which also went into a bitcoin-based product, ProShares Bitcoin Strategy ETF (which tracked bitcoin futures rather than its spot price), Reuters reported.

A number of marquee financial firms including BlackRock, Fidelity and Franklin Templeton lined up to launch bitcoin ETFs, and are now also considering ether (ETH) funds. And yet, Sommer seems ready to write all of this off.

“FOMO is the main reason for putting money into Bitcoin, which remains highly speculative, difficult to categorize and without an immediately identifiable economic function,” the NYT columnist wrote in his latest edition of the “Strategies” newsletter, referencing the U.S. Securities and Exchange Commission’s (SEC) anti-FOMO bulletin.

FOMO, aka the fear of missing out, is certainly a part of crypto investing. For instance, it’s the main driver behind degens chasing the highs of meme coins like BONK or dogwifhat, which truly serve little economic function beyond speculation.

But to write off bitcoin simply as a turn of the roulette wheel with $800 billion on the table is to willingly mislead oneself. You don’t have to personally believe what bitcoiners believe to take their arguments seriously, for fear of mockery or ostracization (FOMOO) by your crypto-skeptic peers, Jeff.

To be fair, Sommer did tip his hat to the technology behind Bitcoin, i.e. b l o c k c h a i n, to hedge his own argument. To wit:

“Bitcoin is a serious proposition, in terms of its underlying structure. The use of blockchain, the decentralized, peer-to-peer structure and the complex mathematical code demand respect. Concepts embedded in Bitcoin and other so-called cryptocurrencies could have real-world importance at some point…”

This was not Sommer’s only completely original and novel thought, he also steadfastly argued that cryptocurrency is a “misnomer” because cryptocurrencies, despite maybe one day having “real-world” utility somewhere, are not really “currencies.” And, he said, the comparison between bitcoin and gold is off because gold has historical “cache.”

As the great and powerful Satoshi Nakamoto once said, “If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry.” At this point it’s not even worth addressing these extremely tired arguments, which seem to be carried out by seasoned journalists everytime crypto notches some victory.

But considering that they’re brand new, I’ll try to do Sommer a solid and get him up-to-date on why interest in bitcoin ETFs is more than FOMO.

First, there is Bitcoin’s philosophical proposition — the idea that there ought to be a global, stateless monetary network available to all. Often called a libertarian wet-dream, the Bitcoin vision is so simple it actually slots neatly into a range of political philosophies — from globalizing neoconservatism to historical Marxism, just not anything truly authoritarian.

Again, you don’t have to buy into the rising trend towards populism to take an interest in it. Many people are feeling with the spread of corporate and governmental surveillance; rising economic inequality; and other geopolitical issues that something like Bitcoin, which empowers everyone without asking for anything of any particular user in return, is a powerful symbol at the very least.

Second, there is the fact that bitcoin is one of the most successful economic investments on record. It may not be the best performing asset every year, and certainly many people have lost money trading it, but there is no denying bitcoin’s meteoric gains over the past decade and a half.

This is where the idea of “hodling” comes in, which recommends people buy and hold bitcoin over a long time horizon, because even if the always-volatile bitcoin dips, those are only paper-losses until you sell. Bitcoin ETFs help a larger swath of retail and institutional buyers access BTC, typically through vehicles like retirement accounts or corporate treasuries that will likely hodl for years if not decades.

True, bitcoin is not guaranteed to rise in price and could even drop to $0. And true, as Sommer points out, there are other ways to gain exposure to crypto via traditional routes, like buying other indexes that invest in crypto-related stocks, like Coinbase, MicroStrategy or the many publicly listed mining companies.

Simply put, there is something powerful to the idea of actually owning an asset that cannot be seized. Spot bitcoin ETFs are a poor approximation of that since buyers of the ETFs never actually get their hands on bitcoin.

But Sommer is shutting himself off to that idea early, and trying to convince his readers that the massive interest in bitcoin that was just demonstrably proven via the launch of 11 bitcoin ETFs this month is all just FOMO. The sad thing is, the argument works just as well in reverse: Even if demand for bitcoin is just a matter of social contagion, then so is skepticism, because you need to hear about something to turn away from it. So, check your sources.

CORRECTION (JAN. 19, 2024): Removes reference to in-kind redemptions, which were not part of the SEC process.

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