Josh Mandel, a Trump follower seeking Republican Senate nomination in Ohio, recently tweeted what he stands for: “Ohio needs to be a pro-God, pro-family, pro-Bitcoin state. Indeed, there has long been a strong connection between Bitcoin support and right-wing extremism – like the traditional association between conservatism and gold obsession, but more.
So what is it?
Now, the fact that many bitcoin enthusiasts are saying weird things does not, in and of itself, mean that cryptocurrencies are a bad idea. People can support the right things for the wrong reasons.
Still, it seems important to understand the cultish aspects of the cryptocurrency movement.
First, though, a little (ahem) about the economy.
I still sometimes come across people who say we live in the digital age, so we should use digital cash. But we are already doing it! Like many people, I pay for most things by clicking a mouse, tapping my debit card, or pressing a button on my phone.
However, all these payments depend on the trust of a third party: people accept debit cards, Apple Pay, Venmo, etc., because they are linked to a bank account. Bitcoin’s goal, as stated in its original 2008 white paper, was to remove the need for this kind of trust: it would validate payments using methods related to cryptography – encrypted communication. The objective was to create a “peer-to-peer” payment system independent of financial institutions.
But why do that? Are banks so unreliable? I’ve been to many meetings where crypto skeptics ask, as respectfully as possible, for simple examples of things you can do better or more cheaply with cryptocurrency than through other forms of payment. I still haven’t heard of a clear example that didn’t involve illegal activity – which may, to be fair, be easier to hide if you’re using crypto.
And the truth is that although Bitcoin has been around for a long time by internet standards – 13 years! – it and other cryptocurrencies have barely penetrated the traditional role of money, as a medium of exchange used to purchase goods and services. Hard numbers are scarce, but it seems that a large majority of cryptocurrency transactions involve market speculation rather than the ordinary business of life.
Yet Bitcoin and its rivals now have a combined market valuation of over $1 trillion. What do investors think they are buying?
One answer is protection against the perpetual fear that governments will inflate all your wealth – as a recent Bloomberg article put it, some billionaires buy crypto in case the money “goes to hell”. Indeed, to our knowledge, there have been 57 hyperinflations in the world. However, they all took place in political and social chaos; do you really think that in such an environment, you would be able to log in and cash out your Bitcoins?
There’s also FOMO – the fear of missing out. Bitcoin has hit a sort of marketing sweet spot: it looks high-tech and futuristic while playing on political paranoia. The resulting capital gains have led many apolitical investors to feel they should get in on the game, while likely prompting public figures like Eric Adams, New York’s new mayor, to talk about bitcoin because that they imagine that it makes them appear forward-looking. .
But does Bitcoin’s muddled logics mean it’s destined to implode? Not necessarily. After all, gold ceased to function as a medium of exchange generations ago, but its value has not collapsed. And we should not overlook the importance of illegal activities. There are approximately $1.6 trillion in $100 bills in circulation – 80% of all US currency – even though the large denominations are very difficult for ordinary consumers to spend. What do you think people do with all these Benjamins?
But let’s put aside market predictions and ask what about the deepening of the alliance between Bitcoin and MAGA?
The answer, I would argue, is that Bitcoin was meant to create a monetary system that works without trust – and the modern right is all about fostering mistrust. COVID is a hoax; the election was stolen; The California wildfires had nothing to do with climate change, they were started by space lasers controlled by the Rothschilds.
In this context, it is perfectly natural for MAGAesque politicians to demand an end to a monetary system that runs through the banks – we know who controls them, don’t we? – and relies on a currency run by government-appointed officials. There is no evidence of widespread monetary abuse, but that doesn’t matter to the far right.
So the fact is, while there are real economic problems associated with cryptocurrencies, their rise has a lot to do with the broader political madness that has brought American democracy to the brink.
Krugman writes for The New York Times.