The Pied Piper

June 25, 2021

“When the whole world is running towards a cliff, he who is running in the opposite direction appears to have lost his mind.” – C.S. Lewis

Everyone got the chance, back in April of 2020, when bitcoin was trading at $7,000. It was shortly after the black swan event that its narrative was born.

The narrative that institutions were buying, hedge fund managers used phrases like “inflation hedge” and “digital gold” on CNBC. It took bitcoin just over a year to reach $60,000, while those same institutions held interviews estimating price targets as high as $600,000.

You listened, entranced, and so did your Uber driver that day, but he bought Shiba Inu instead, and after that next right-hand turn, was inundated onto the Sunday Times Rich List.

I’m not taking a jab at anyone who listened to a narrative, because I did, narratives are trends and important to keep an ear to. But the narrative is also the pied piper, it’s a melodic tune that you can’t quite keep out of your head.

Crypto is volatile. It’s volatile because it's speculative and speculative because it has limited fundamental value and therefore people attribute its value to a price tag. This means people are less likely to keep hold of it if the price depreciates. They are prone to feeling fear, because they don't understand the true value of what they're buying. Even more so than when they buy stocks or real estate.

This makes crypto – by a long shot – the most emotional asset class. Everyone is here when the pied piper is slowly edging towards the cliff edge, and every cycle a different person is playing the piper.

But what happens when the music stops? The silence breathes out from around you, you might realise you are submerged in a coin that’s reminiscent of a breed of Japanese hunting dog. Or, much like myself, you bought Zcash as the market reached an entirely new magnitude of euphoria.

Whichever it is, it matters no more.

Look at how the tune has changed, but the world around us hasn’t. Sure, lockdowns are easing in the US and in parts of Europe – I bet many are getting ready to jet off for an overdue holiday. They will be back in Autumn. The overarching and lasting effects of the pandemic on our global economy are unchanged, the Fed will subdue inflation induced panic by talking about raising rates, but they will wind the clock back eventually.

The bright side? The majority of you get to go and enjoy a full life for the first time in over a year. Brighter still, the world turns its back on bitcoin – as it struggles to deal with the harsh reality that billionaires express little empathy for those who didn't become financially free from buying a dog token.

I will be checking in every now and again, but for most people, this will be a time to go and live life a little. The Pied Piper of Guggenheim is playing his tune, and I’m paying attention.