Share
Facebook
Twitter
LinkedIn
Pinterest
Reddit
Digg
Tumblr
Email
In 1637, a single tulip bulb could buy you a house in Amsterdam. In 1849, prospectors abandoned everything to chase gold in California. In 1999, companies added “.com” to their names and watched their share prices double overnight. Today, we’re living through another speculative mania, except this time the object of our collective delusion isn’t even a flower you can plant or a metal you can hold—it’s lines of code on a distributed ledger.
Cryptocurrencies, we’re told, represent the future of money, a hedge against inflation, a democratisation of finance. Strip away the jargon and you’re left with a simpler truth: crypto, like gold before it, derives its value entirely from what the next person is willing to pay for it. Nothing more. The difference? Gold has had five millennia to embed itself in human psychology. Bitcoin has had fifteen years.
Let’s talk about gold for a moment. For thousands of years, we’ve treated this soft, yellowish metal as the ultimate store of value. Why? It’s scarce, sure. It doesn’t corrode. It’s pretty. But honestly, gold’s industrial applications are minimal relative to its price. You can’t eat it. You can’t burn it for energy. Its primary use—by a wide margin—is sitting in vaults and adorning jewellery.
Gold’s value proposition rests almost entirely on collective belief reinforced by cultural conditioning. We value it because our ancestors valued it, and their ancestors before them. That’s not intrinsic value—that’s five thousand years of successful marketing.
Cryptocurrency enthusiasts want you to believe Bitcoin is “digital gold.” They’re half right. Like gold, crypto’s worth depends entirely on what someone else will pay tomorrow. The uncomfortable question is: what happens when that belief evaporates?
The crypto faithful will point to “digital scarcity”—Bitcoin’s famous 21 million coin limit. Scarcity alone doesn’t create value. I could create a digital currency tomorrow with a cap of ten coins. Would that make it valuable? Of course not. Scarcity must be paired with demand, and demand for speculative assets is fickle.
Then there’s the “inflation hedge” narrative. Except empirical data shows Bitcoin behaving less like gold and more like a high-beta technology stock. When markets wobble, Bitcoin doesn’t provide a safe harbour—it amplifies the panic. Some hedge.
And decentralisation? That ship has sailed. Bitcoin ownership is increasingly concentrated amongst a small number of wealthy individuals (known as whales) and large institutions. The democratising promise of crypto has given way to the same concentration of wealth and power we see everywhere else.
At least gold has millennia of cultural acceptance. Crypto has fifteen years and a volatility profile that would make a casino operator blush.
Early Bitcoin adopters created a culture around “HODL”—hold on for dear life. What sounds like conviction is actually a sophisticated strategy to reduce supply artificially, while evangelising to create demand. Every social media influencer, every celebrity endorsement, every “number go up” meme serves one purpose: finding new buyers to provide exit liquidity for those who got in early.
This isn’t a conspiracy theory—it’s how speculative bubbles work. The Dutch who bought tulips in 1636 needed someone to sell to in 1637. The difference now is we’ve dressed it up in the language of financial revolution.
Look at the corporate treasury strategies emerging in recent months. Companies raising billions not for research, not for development, but to gamble on Bitcoin. Strategy (formerly MicroStrategy) leads this parade, but others are following. They’re selling you a premium for a corporate wrapper around an asset you could buy directly through an ETF. Why would you pay more for less unless the marketing was exceptionally good?
What legitimises speculation better than political endorsement? The Trump administration’s pro-crypto stance has been remarkable to watch. Rescinding warnings about cryptocurrency in retirement accounts. The GENIUS Act and similar legislation. When politicians embrace crypto this enthusiastically, ask yourself: who benefits?
It’s certainly not the average worker whose 401(k) is now exposed to an asset class with annualised volatility that can exceed 50%. Imagine checking your retirement balance and finding it’s swung 30% in a fortnight. That’s the reality of crypto “investing.”
Crypto advocates will tell you volatility is just growing pains. Markets mature, prices stabilise, and everything works out. Except gold—actual gold—trades within a relatively stable range. You don’t wake up to find gold has dropped 40% because Elon Musk tweeted something cryptic.
The only rational way to profit from crypto isn’t betting it goes up—it’s exploiting the chaos. Market-neutral strategies and arbitrage funds make money from inefficiency and volatility, not from belief in the underlying asset. They’re profiting from the casino, not playing at the tables.
We’ve seen this film before. SPACs. ICOs. NFTs. Each promised revolution, each attracted billions, each left retail investors holding worthless assets while early movers cashed out. The warning signs are already visible. Corporate Bitcoin purchases are slowing. Share prices for crypto treasury companies are declining even as Bitcoin prices hold steady or rise. Meta and Microsoft shareholders recently rejected proposals to add Bitcoin to their corporate treasuries. Why? Because serious investors recognise speculation when they see it.
The question isn’t if the collective belief will crack—it’s when.
Here’s a thought experiment. If all cryptocurrency exchanges closed tomorrow, what could you do with your Bitcoin?
With gold, you could make jewellery. There are limited industrial applications. Millennia of cultural conditioning mean someone, somewhere, would still want it.
With Bitcoin? Nothing. Zero. It has no offline utility, no tangible properties. Its value exists entirely within the system that creates it. That’s not a feature—that’s a fundamental vulnerability.
We’ve created an asset whose entire value proposition rests on circular reasoning: it’s valuable because people think it’s valuable. When enough people stop thinking that—and they will—the whole structure collapses.
Crypto advocates tout the security of blockchain technology. Yet the reality reveals a different story—one where your entire fortune can vanish in an instant through no fault of the technology, but through simple human error or criminal activity.
Consider James Howells, a British IT worker who accidentally threw away a hard drive containing the private keys to 8,000 bitcoins in 2013. His partner discarded it at his request, unaware of its significance. Today, that hard drive sits somewhere in a Welsh landfill, holding access to approximately $800 million in Bitcoin. Howells has spent over a decade begging local authorities for permission to excavate the site. He’s even offered to buy the entire landfill. The council keeps refusing, citing environmental concerns. Those bitcoins exist on the blockchain—they’re just permanently inaccessible.
Or Stefan Thomas, a German programmer who stored the private keys to 7,002 bitcoins on an encrypted hard drive. He forgot the password. The device gives him ten attempts before it locks permanently. He’s used eight. Two guesses stand between him and roughly $680 million. Get it wrong, and that fortune disappears forever.
Estimates suggest between 2.3 and 3.7 million bitcoins—worth hundreds of billions of dollars—are permanently lost. That’s nearly 20 per cent of all bitcoins ever mined, gone forever because someone forgot a password, threw away a hard drive, or died without sharing their private keys. With traditional banks, you can reset a password. With Bitcoin’s vaunted decentralisation, there’s no such safety net. Lose your key, lose your fortune. Full stop.
Then there’s outright theft. In August, the U.S. Department of Justice seized over $2.8 million in cryptocurrency from ransomware criminals who’d used it to launder proceeds from attacks on businesses worldwide. Crypto’s anonymity and irreversibility make it the perfect vehicle for criminal enterprise. Once funds transfer, they’re gone—no chargebacks, no bank intervention, no recourse.
This is what passes for innovation in the crypto world: a system where forgetting a password costs you hundreds of millions, where criminals thrive, and where “security” means you alone bear the catastrophic consequences of any mistake.
I’m not saying crypto has no place in portfolios. For those with high risk tolerance and money they can afford to lose entirely, a small allocation—perhaps 1-5%—might make sense. Not as an investment, but as a speculation.
If you want exposure to crypto’s volatility without the directional bet, look at market-neutral or arbitrage strategies. These funds profit from the chaos without requiring you to believe Bitcoin will hit a million dollars or whatever this month’s target is.
Better yet, stick with assets that generate cash flows. Shares that pay dividends. Property that collects rent. Bonds that pay interest. Boring, perhaps. But they produce income whether or not the next person believes in them.
Or consider sitting this one out entirely. Not every opportunity is an opportunity for you.
Crypto’s value rests entirely on the faith of its participants. Unlike productive assets, it generates no income. It serves no essential function that couldn’t be better served by existing systems. The “heist” isn’t Bitcoin itself—it’s the wealth transfer from late entrants to early movers, facilitated by hype, influencer marketing, and institutional legitimisation.
In speculative manias, the asset doesn’t matter. The timing of your exit does. And in a game of musical chairs, most people are left standing when the music stops.
You can’t eat gold. You can’t spend Bitcoin. But you can lose both by betting on other people’s greed. The choice, as always, is yours. Just remember: in every gold rush, the people who made reliable money weren’t the prospectors—they were the ones selling shovels.
The crypto industry has sold us all shovels. Whether there’s any gold at the end of this rainbow remains to be seen. I wouldn’t bet the retirement fund on it.
Steve Baron is a New Zealand-based political commentator and author. He holds a BA with a double major in Economics and Political Science from the University of Waikato and an Honours Degree in Political Science from Victoria University of Wellington. A former businessman in the advertising industry, he founded the political lobby group Better Democracy NZ. https://stevebaron.co.nz