COMMENTARY: There plenty of legitimate reasons to doubt and criticise cryptocurrencies and the excessive exuberance in the market we saw during the past couple of months.

And, then there’s hackneyed, knee-jerk comparisons to Dutch “tulipmania”.

When an article begins on the latter note, it’s a safe bet that the criticisms aren’t going to be nuanced or come from a place of deep understanding.

ABC business editor Ian Verrender proved as much earlier this week with yet another “bItCoIn iS dUtCh TuLiPs ReVisiTeD” article tied to the recent crash.

It’s more than a bit silly. Bitcoin has been around for 12 years now. Fortune 500 companies are adding it to their balance sheets. China is experimenting with digital currency. Hedge fund billionaire Ray Dalio says he owns Bitcoin and prefers it to bonds. Former Bitcoin critic Goldman Sachs now calls it an investable asset worth taking seriously.

There’s no comparison to Dutch tulipmania — a story that isn’t even true. It was largely the invention of a Scottish journalist, Charles Mackay. Sound familiar?

If that was the only thing that Verrender got wrong, that’d be one thing. But…

He claims Bitcoin investors “don’t get” that Bitcoin doesn’t “own” its technology. Investors, he writes, “are quick to extol the virtues of blockchain but don’t understand that Bitcoin is just one of many thousands of organisations that employ it.”

Really? Every crypto investor I know is keenly aware of the thousands of altcoins that also use decentralised ledger technology. It’s also not true, as Verrender writes, that “few investors will admit … that Bitcoin is slow and hugely expensive to use.”

That’s a fact that everyone in the crypto space acknowledges. There are potential fixes in the works, “layer 2” scaling solutions, or perhaps Ethereum or an altcoin like Cardano may overtake Bitcoin. Or maybe Bitcoin will be “tokenised” and traded on a smart contract platform, rather than its own blockchain. But this is a fact everyone openly admits.

More Verrender: “Binance, a major exchange, runs off the Ethereum network and offers others the chance to piggyback its system.”

How can the ABC’s business editor be so ignorant of what he’s critiquing? Binance doesn’t run off the Ethereum network; it is a centralised exchange. It does also offer the Binance Smart Chain, a speedy competitor to Ethereum, which others are free to piggyback on. But the exchange itself doesn’t run on blockchain technology.

Verrender does actually have some kind words for one cryptocurrency …. Ripple Lab’s XRP. He writes it seems to have “a real business model, along with executives, employees and actual offices.”

No. Ripple’s technology is so flawed it had to pay MoneyGram to use it.

Meanwhile, Verrender ignores all the decentralised finance protocols like Uniswap, MakerCompoundAave and Sydney-based Synthetix that are being built on Ethereum, essentially as an alternative financial system to the legacy one.

As Apollo Capital’s Marc Woodward told me last week, “there’s real business models in defi, generating huge revenues, huge value for participants, huge value for tokenholders.”

These may be younger and less well-known names (especially outside the crypto space) than XRP, but they are far more respected inside it.

Beyond defi, cryptocurrencies are also being used for everything from creating livestreaming platforms to reinventing the internet so it can natively host applications to decentralised sports wagering. I’m not saying all those projects will succeed, but you’d never know about them from Verrender’s piece.

He does devote a paragraph to CumRocket and PooCoin, though.

Still, Verrender does get one thing right: that “about the only thing (Bitcoin) is good for is speculation”. Mostly true!

But is that really a criticism? Financial markets are built on speculation. When you buy Mesoblast (ASX:MSB) shares, you’re speculating on the company’s ability to actually overcome resistance from US regulators and get its novel stem-cell treatment approved. When you buy shares in one of the ASX’s many junior explorers, you’re speculating on their ability to actually find developable minerals and build a mine. There are a host of tech companies with unproven, speculative business models out there.

An investment in Bitcoin is a speculative bet that the internet will disrupt analogue money the same way it’s transformed everything from the news business to retail shopping to television.

I have no idea if that will happen or not — but I do know that just because something is a “virtual commodity” doesn’t mean it doesn’t actually exist.

SMH critique

Unfortunately, the ABC’s piece wasn’t the only crappy crypto critique this week.

Former Sydney Morning Herald tech editor Ben Grubb also advised his readers to sell all their cryptocurrency during the recent crash, even as most professional investors called it a buying opportunity.

Grubb recounted how he had purchased a small amount of Dogecoin back in early February and couldn’t stand the volatility.

“The anxiety that came with watching my $50 investment sway between $30 and $70 was excruciating,” he wrote, apparently seriously.

Fear-inducing stuff. Living on the edge!

It is absolutely true that Bitcoin, Litecoin and Dogecoin are very energy-intensive … and yes, as we’ve reported, there’s a big Dogecoin whale out there that owns 28 per cent of the supply.

But there are also plenty of coal miners on ASX; is that really a reason not to own shares? There are plenty of “green” cryptos out there like Cardano, Tezos and Solana that consume a fraction of Bitcoin’s energy use, and don’t have such a skewed distribution of coins.

Next time, Ben: research before you buy.

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