The entire cryptocurrency ecosystem has been shaken by the surge in institutional capital. In the past, the increases were mainly due to retail. However, things are different now. We are at the beginning of a new era. Our community is changing. The cypherpunks arrived first. Then the anarchists. Then the libertarians. More recently, retail speculators, venture capitalists, and family offices have arrived. Now come the hedge funds. This implies that the ideological element loses strength when the community changes its configuration. Who is the owner of your bitcoins?
It’s not a secret to anyone that old school bitcoiners have a very strange concept of “possession”. Many of these ideas stem from the radical individualism of the anarcho-capitalist philosophy, which confuses custody for property. That said, the money in the bank is not your money. But the money is under your mattress. In addition, it is the extreme distrust of governments and groups. In other words, only the individual is reliable. The “other” is never.
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The money under the mattress is considered non-seizable simply because it is not in the care of organizations that are controlled by the authorities. The case of the 2012-1013 financial crisis in Cyprus is often cited to claim that it will certainly do so in the United States and the rest of Europe if it did in Cyprus at this time.
It is true that in the past many countries were forced to temporarily freeze bank deposits during panic in order to prevent capital flight and, with it, a financial collapse. However, we have to be very careful to bring this danger to the extreme, as this will happen globally. No, paranoid gentlemen. I am not resourceful. While it is true that this is a possibility, it is highly unlikely. It is also true that the internet can be turned off.
In these extreme cases, it is best to have friends and physical objects as we are speaking in an apocalyptic scenario. During the 2019 power outages in Venezuela, there was no power, no phones or banks for several days. The only way to transact was by cash or credit.
My case was very special because I had electricity, telephones, and internet near a hospital. But it wasn’t very useful because the banks weren’t working and I couldn’t communicate with others. My bitcoins in my hardware wallet were useless. My bitcoins in other wallets were useless. My money in the bank was useless. In these rare cases, only the food in the pantry, the friendly neighbor, and the physical items will work.
We always hear about hacks, people who forgot their private key and bitcoin bitcoins that have been confiscated by the authorities, but the only thing that seems to matter is that the government of Cyprus intervened in the banking business in 2012 Has. However, I fear that anything transferable is confiscable. Cash is seizable. Gold is seizable. Of course everything is relative. Nobody denies that money in the bank is more seizable than cash or gold. However, this also depends on the jurisdiction of the bank. It is not the same to have money in a Venezuelan bank as it is in a Swiss bank.
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Now radical individualism forgets that money is a social enterprise. In fact, collecting money under the mattress has huge limitations. For one thing, it’s not safe. We all know how dangerous it is to rely on memories or secrets. Of course we can hide our secret code and take all precautions. But what happens in the event of death? Will it be passed on to our heirs? Well, we could share our secrets with them, but that requires getting out of our radicalism a bit to trust others.
Despite all of the risks and responsibilities associated with personal custody, we must also remember that it is an extremely lonely activity. This is a scenario that assumes that the individual is the main unit of the economy. And the most complex organizations are not considered.
Suppose the truckers union in Country X wants to open a pension fund for its members. The Board of Directors will select an outside administrator to manage the Fund. Next, the manager designs an investment portfolio to place the trucker’s money. In this case, the administrator cannot afford to tell the board that they are keeping the money under their mattress and that only they have the access code. That would be unacceptable folly. The smartest thing to do would be to choose a third party (heavily regulated) that guarantees the deposit with insurance.
This is the normal system in the hedge fund world. Here, custody is not synonymous with property. This is a network with balances and checks. The government participates in safeguarding the interests of the consumer. In this case, the truckers. The custodian is not the owner of the money. Nor is the manager the owner of the money. The owner is a collective. Who has the private key? Never mind. The real owners certainly have a properly registered contract that serves as a certificate of ownership for these funds.
But what if you are an anarchist or a libertarian and don’t believe in collectives, courts or governments? In this case, things get complicated. The safest option would be to resort to individual responsibility. In the past, the radicals of this trend have actually turned to gold, land, and the use of weapons to be “owners”. But that is not the world of institutional capital. The world of institutional capital is much more social and the concept of property is more fluid and less inflexible.
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Having money under your mattress has always been associated with financial backwardness. In part because it isolates you from the banking system. This is the problem of the Unbanked. Why is that a problem? Well, because you lose access to services like loans, for example.
Now the arrival of institutional capital is a major challenge for people who have radical ideas about the concept of property. ANDThen we need to prepare because we will see more headlines like this: “The bitcoins in Paypal are not your bitcoins.” “Coinbase is a bank” etc.
Having your money doesn’t mean you have your private key. This is a concept that comes from an industry. But it doesn’t necessarily represent the rest of the world. How much money is in the personal care of Jeff Bezos, Bill Gates or Warren Buffet? Not much. But that doesn’t mean they don’t own anything.
Bitcoin is growing. That means it’s time to grow up. Radicalisms are possible in small groups because it is much more difficult to be radicals in larger groups. Here’s a thought: the effects of institutional capital will go beyond a price hike. This also affects the Bitcoin culture.