Generational Trust, R/WallStreetBets and Bitcoin | Sebastian Rowe-Munday
For analysts and investors above a certain age, the present hype surrounding Bitcoin and r/Wallstreetbets is unfathomable.
Over the previous decade, the Cryptocurrency Bitcoin has been the worlds greatest performing asset. As of December 2020, its all-time value had soared 500,000% on one exchange. Then on January 27th, an internet forum (r/WallStreetBets) managed to bankrupt two multi-billion dollar Wall-Street hedge funds, creating worldwide market volatility.
The reaction by established outlets and analysts has been likened to ‘Don Draper sitting back and trying to listen to the Beatles, then giving up after a short while, confused and discomforted’. As is the case throughout history, the culture of the youth is invading the territory of the established order.
Inevitably, it will succeed.
The radical, fundamental changes the internet was prophesised to bring are now coming home to roost. We saw it first with Social Media’s supplementation of traditional media. Next was the turn of online Retail. Now it is coming for one of society’s most established, protectionist pillars: Financial institutions.
The exponential rise of Bitcoin and the newfound notoriety of r/WallStreetBets are both direct consequences of the 2008 Financial Crisis. The crash and the subsequent bail-out of financial institutions irreparably damaged the reputation of financial institutions among my generation.
Bitcoin was created two months after the collapse of Lehman Brothers. Its inventor specified that the aim of the new currency was to create a new system of peer-to-peer transaction. It was an explicit break away from the financial institutions that had wrecked the global economy and further enriched themselves by securing bailouts.
Likewise, the favoured broker of choice for r/WallStreetBets is a platform called Robinhood, a start-up created post-crash that similarly sought to address inherent unfairness in the financial system. Robinhood offers a way to trade without paying commission to an established fund, and thus further enrich already wealthy institutions. The platforms aim, as is obvious by its name, is to ‘democratize finance for all’.
Both Bitcoin and Robinhood, at their core, aim to take power away from established financial institutions. At present, they are both succeeding.
Established analysts with decades of experience, consistently point to a lack of trust as the reason why these new assets and platforms are destined to fail. They simply cannot understand why new internet technologies with no material or centralised backing could ever garner trust.
What they fail to realise is that the perception of a lack of trust is generational. The amateur investors on r/WallStreetBets certainly appreciate a lack in trust, but only in the established financial institutions that ruined many of their childhoods.
The children who grew up with the consequences of Lehman Brothers are more willing to put their trust into new internet technologies. They are the first generation who grew up with the internet to reach adulthood. They view the digital sphere as an extension of society, rather than a mere tool to aid it.
The concept of trust is the same as the concept of power. it is an illusion, a trick that only resides where people believe it to reside.
The internet generations trust lies within the internet, not the financial institutions.
It is time to accept the New Normal.